(Bloomberg) -- The Federal Reserve said it would do what is needed to getting prices under control, reiterating that price stability is needed to support a strong labor market and calling its commitment to reining in inflation “unconditional.”
“The committee is acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials,” the Fed said in its semi-annual report to Congress released Friday. “The committee’s commitment to restoring price stability -- which is necessary for sustaining a strong labor market -- is unconditional.”
The Fed report, which provides lawmakers with an update on economic and financial developments and monetary policy, was published on the central bank’s website ahead of Chair Jerome Powell’s testimony before the Senate Banking panel on Wednesday and the House Financial Services Committee a day later.
Fed officials lifted their benchmark rate by 75 basis points this week -- the largest rate increase since 1994 -- and signaled that more hikes are coming as they combat an inflation rate at a 40-year high. Powell said the central bank could raise rates by 50 basis points or by 75 basis points in July, depending on what happens with inflation and the economy.
Policy makers decided on a more aggressive rate increase after an inflation report released last week came in hotter than anticipated and some preliminary surveys suggested that consumers’ inflation expectations could be rising.
Fed officials view keeping inflation expectations anchored as an important step to preventing price increases from spiraling out of control. The consumer price index rose 8.6% in May from a year earlier, according to data released by the Labor Department last week.
The central bank’s efforts to calm inflation could lead the US unemployment rate to rise from today’s low levels, a shift Powell said may be needed to cool an overheated labor market. The US unemployment rate was 3.6% in May, slightly above the levels seen prior to the pandemic, when the jobless rate was the lowest in 50 years.
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