Speaking at a conference in Washington, he pointed out that strong intervention by the central bank is now unnecessary as the US financial sector is already strained by the recent turmoil in the banking sector.
“We’ve come a long way,” Powell emphasized in his speech. By this, he refers to the many rate hikes the central bank has already implemented to combat hyperinflation in the past. “Having come this far, we can look at the data and develop a perspective to make careful assessments,” he added, reading from prepared notes.
tightens
Powell also explained that the idea behind interest rate hikes is that borrowing becomes more expensive. With this, the central bank hopes to curb demand in the economy and ensure that prices do not rise too fast.
Such fiscal tightening can be orchestrated by central bank interest rate hikes. But if the market itself avoids high risks and makes borrowing attractive, that too surely works. “As a result, our policy rate may not need to rise, otherwise we would have to meet our targets.”
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