U.S. Markets open in 1 hr 31 mins
  • S&P Futures

    +12.50 (+0.32%)
  • Dow Futures

    +121.00 (+0.39%)
  • Nasdaq Futures

    +53.50 (+0.45%)
  • Russell 2000 Futures

    +6.00 (+0.35%)
  • Crude Oil

    +0.89 (+0.90%)
  • Gold

    +6.70 (+0.39%)
  • Silver

    +0.22 (+1.15%)

    +0.0009 (+0.0917%)
  • 10-Yr Bond

    0.0000 (0.00%)
  • Vix

    -0.72 (-2.61%)

    +0.0054 (+0.4515%)

    -0.2230 (-0.1641%)

    +381.47 (+1.90%)
  • CMC Crypto 200

    +4.54 (+1.04%)
  • FTSE 100

    +90.95 (+1.28%)
  • Nikkei 225

    +382.88 (+1.47%)

Fed Says Commitment to Restoring Price Stability ‘Unconditional’

·3 min read

(Bloomberg) -- The Federal Reserve said it would do what is needed to get prices under control, reiterating that price stability is necessary to support a strong labor market and calling its commitment to reining in inflation “unconditional.”

Most Read from Bloomberg

“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 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 Wednesday and 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 last week came in hotter than anticipated and some preliminary surveys suggested 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.

Financial conditions tightened “significantly” this year as the Fed raised interest rates in response to higher inflation, with equity prices declining and corporate bond yields rising, the Fed said. Funding pressures also emerged in commodities markets after Russia invaded Ukraine, but the financial system remained “resilient,” the central bank said.

Recent strains in stablecoins and other digital assets shed light on the vulnerabilities for those markets, the Fed said.

“The collapse in the value of certain stablecoins and recent strains experienced in markets for other digital assets demonstrate the fragility of such structures,” the report said.

Labor Market

The central bank’s efforts to calm inflation could lead the US unemployment rate to rise from currently low levels, a shift Powell said may be needed to cool an overheated labor market. The unemployment rate was 3.6% in May, just above the levels seen prior to the pandemic, when the jobless rate was the lowest in 50 years.

The job market still appears tight for now, with demand for labor continuing to outstrip supply and some employers struggling to hire, the Fed said in the report. “That said, some possible signs of modest easing of labor market tightness have recently appeared,” the Fed said, noting that some measures of wage growth may have moderated and that employers in some Fed districts have seen “modest improvement” in their ability to find workers.

(Adds more findings from the report starting in fifth paragraph)

Most Read from Bloomberg Businessweek

©2022 Bloomberg L.P.