Fed’s Powell says inflation can be controlled without ‘too high social costs’

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The Federal Reserve is “strongly committed” to controlling inflation, but there is still hope that this can be done without the “very high social costs” involved in past struggles with inflationary pressures, Fed Chair Jerome Powell said this week. Thursday.

Referring to former Fed Chair Paul Volcker’s battle with inflation in the early 1980s, when the US central bank’s monetary policy triggered a recession and the unemployment rate reached 10%, Powell said in comments on a Cato Institute conference that Volcker was trying to eradicate years of rising inflation expectations. Volcker “followed several failed attempts” to lower inflation, Powell said.

“My colleagues and I are strongly committed (to reducing inflation)…We think we can avoid the kind of very high social costs that Paul Volcker and the Fed had to put into play.”

He also said he sees no conflict between the two goals of the US central bank determined by Congress – to promote full employment and price stability –, with no reason to change to a single target focused only on inflation.

“In particular at the current moment, I don’t see the two goals in conflict, because without price stability we won’t be able to achieve the kind of strong labor market we want for a sustained period that benefits everyone, so I don’t see a case to switch to a single term,” he said, in response to a question at an event organized by the Cato Institute.

Powell added that he believes both goals can be achieved in the “medium term.”

(with Reuters)

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