[Image source = Reuters Yonhap News]
Federal Reserve Chairman Jerome Powell said he expects to announce the start of a balance sheet contraction at the next regular meeting of the Federal Open Market Committee. He also confirmed that he could accelerate the plan if the situation calls for aggressive monetary tightening.
Chairman Powell said at a press conference after the FOMC decided to raise interest rates for the first time in three years and three months at the FOMCs regular meeting on March 16 and said that he expects to announce the start of the balance sheet contraction at the next meeting.
He added that he was mindful of the broader market and economic context when making interest rate and balance sheet decisions, and that he would use our tools to support financial market and macroeconomic stability.
In addition, Chairman Powell said it would take longer than previously expected for inflation to return to the 2% price target range, noting that inflation risks are more serious than expected.
When asked what determines the rate at which the Fed raises rates, he said the Fed could accelerate its plans if more aggressive monetary tightening is needed, and all meetings are in real time.
He also assessed that the impact of the Russian invasion of Ukraine on the US economy is very uncertain.
However, Powell said the likelihood of a recession next year was not particularly high, saying all signs showed that US economic growth was still strong.
In a statement after the FOMC meeting, the Fed announced that it would raise the federal funds rate by 0.25 percentage points from 0.00-0.25% to 0.25-0.50%. It is the first time in three years and three months since December 2018 that the Fed has raised the key interest rate.
In addition, through the dot plot, the interest rate is expected to be 1.9% by the end of this year. This implies an additional six-fold increase of 0.25 percentage points each in the remaining FOMC. It is expected that three increases will be possible next year.