Rate hike of 50 basis points on the table for May: US Fed chair

ANKARA

A half-point rate hike is possible in May to get inflation down to 2%, US Federal Reserve Chair Jerome Powell said on Thursday.

“I would say that 50 basis points will be on the table for the May meeting,” Powell said in an International Monetary Fund panel.

He said many at the Fed believe that one or more hike of 50 basis points will be reasonable.

“It is appropriate, in my view, to move a little more quickly on interest rates,” he added.

On March 16, the Fed started its monetary tightening with a 25-basis point increase to a range of 0.25%-0.5%.

Annual consumer inflation in the US soared to 8.5% in March, the highest level since December 1981.

Powell said the US economy is a bit more removed from the immediate effects of Russia’s war on Ukraine.

The US will feel the effects of the war with further upward pressure on inflation and “a bit of” downward pressure on growth, he noted.

He underlined that the US economy performs well with a tight labor market and is expected post strong growth this year.

The Fed is determined to get inflation back down to its 2% goal without a recession, Powell explained.

“It is absolutely essential to restore price stability,” he added.

Christine Lagarde, president of the European Central Bank, pointed out that growth risks skewed to the downside mainly due to the war.

“So there might be more cuts [in growth forecast] to come and to the upside for inflation,” she said.

Being next door to Ukraine, Europe has been predominantly impacted by the war and its recovery has stalled to a certain degree, Lagarde added.