The Federal Reserve raised its policy interest rate by a quarter percentage point May 3, citing the need to address high inflation and achieve price stability. This move brings the target range for the federal funds rate to 5 to 5-1/4 percent. Fed Chair Jerome Powell highlighted the central bank's commitment to achieving its dual mandate, stating, "Our focus remains squarely on our dual mandate to promote maximum employment and stable prices for the American people."
Powell acknowledged the hardships faced by Americans due to high inflation, emphasizing the central bank's dedication to returning inflation to the 2 percent target. "We remain strongly committed to bringing inflation back down to our 2 percent goal. Price stability is the responsibility of the Federal Reserve. Without price stability, the economy does not work for anyone," he said.
The Fed's decision comes as the US economy has shown modest growth, with real GDP increasing at a 1.1 percent pace in the first quarter of the year. The labor market remains tight, with job gains averaging 345,000 jobs per month in the first quarter and the unemployment rate at 3.5 percent in March. Inflation remains above the Fed's long-term goal of 2 percent, with total PCE prices rising 4.2 percent and core PCE prices rising 4.6 percent over the 12 months ending in March.
The Fed will continue to monitor economic developments and take a data-dependent approach in determining future policy adjustments. Powell affirmed the central bank's preparedness to do more if necessary, stating, "We are prepared to do more if greater monetary policy restraint is warranted."
