Washington: US Federal Reserve Chair Jerome Powell has defended its ongoing key policy rates hike, saying restoring price stability particularly when inflation is high may require measures 'that are not popular'.
The US Federal Reserve in its latest monetary policy meeting raised interest rates by 50 basis points (bps). The US central bank's policy rate is now in a target range of 4.25-4.50 per cent, the highest level in 15 years, and notably, it was near zero in the early part of 2022.
Prior to the recent 50 basis points hike, there has been a fourth consecutive hike of 75 basis points magnitude.
Raising interest rates is a monetary policy instrument that typically helps suppress demand in the economy, thereby helping the inflation rate decline.
"But restoring price stability when inflation is high can require measures that are not popular in the short term as we raise interest rates to slow the economy," said Powell, speaking at the symposium on Central Bank Independence, Sveriges Riksbank, Stockholm, Sweden on the subject 'Central Bank Independence and the Mandate--Evolving Views'.
Price stability, he said, is the bedrock of a healthy economy and provides the public with 'immeasurable benefits' over time.
"The absence of direct political control over our decisions allows us to take these necessary measures without considering short-term political factors. I believe that the benefits of independent monetary policy in the U.S. context are well understood and broadly accepted," he added.
About the central bank's independence and the mandate, which was the theme of the symposium, Powell noted the case for independence lies in the benefits of insulating monetary policy decisions from short-term 'political considerations'.
Taking his argument ahead, he said the central bank should stick to knitting and not wander off to pursue perceived social benefits that are not tightly linked to statutory goals.
The next US monetary policy meeting is scheduled for January 31 and February 1.