Federal Reserve Board Chairman Jerome Powell announced on Wednesday yet another interest rate hike of 25 basis points (a quarter of a percent), sending the stock market into shock, with the Dow Jones Industrial Index closing over 250 points down.
“We on the committee have a view that inflation is going to come down not so quickly,” Powell said. “It will take some time, and in that world, if that forecast is broadly right, it would not be appropriate to cut rates, and we won’t cut rates.”
He also noted that there was a possibility for even more rate hikes, saying, “We are prepared to do more if greater monetary policy restraint is warranted.”
“There are no promises in this, but it just seems to me that it’s possible that we can continue to have a cooling in the labor market labor market without the big increases in unemployment that have gone with many prior episodes,” Powell concluded.
Lawrence Yun, the chief economist for the National Association of Realtors, called Powell’s decision “unnecessary and harmful,” according to CNBC, saying, “They are becoming zombie-like banks, unable to lend even to good businesses as they are more concerned with balance sheet shuffling for survival.”
Powell said during the announcement, “Looking ahead, we’ll take a data-dependent approach to determining the extent to which additional policy firming may be appropriate.”
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