A MARTINEZ, HOST:
The Federal Reserve is rapidly unwinding its easy money policies as it tries to crack down on sky-high inflation. The central bank raised interest rates this week by half a percentage point and suggested two more similar rate hikes are likely in the next two months. Here's NPR's Scott Horsley.
SCOTT HORSLEY, BYLINE: Federal Reserve Chairman Jerome Powell held his first in-person news conference in more than two years Wednesday, but his opening comments were not aimed at the roomful of reporters in front of him. Instead, Powell said he wanted to speak directly to the American people, those who've been struggling to cope with the soaring price of groceries, gasoline and other essentials.
(SOUNDBITE OF PRESS CONFERENCE)
JEROME POWELL: That's who we work for. It's inflation that people are feeling all over the country. And it's very important that they know that we know how painful it is and that we are working hard on fixing it.
HORSLEY: Through most of the pandemic, the Fed kept interest rates close to zero in an effort to prop up the economy. But with prices now climbing at the fastest pace in four decades, the central bank has done a quick about-face. By making it more expensive to borrow money, Powell and his colleagues hope to cool off consumer demand and bring inflation under control. Some economists warn that's likely to lead to a recession. But despite challenges posed by the war in Ukraine and ongoing COVID lockdowns in China, Powell says the U.S. economy is in good shape to weather the higher interest rates.
(SOUNDBITE OF PRESS CONFERENCE)
POWELL: I think we have a good chance to restore price stability without a recession, without, you know, a severe downturn and without materially higher unemployment.
HORSLEY: The stock market, which had been even more volatile than usual in the run up to this week's Fed meeting, rallied sharply while Powell was speaking, especially when the Fed chairman said he and his colleagues are not seriously considering even larger rate increases of three-quarters of a percent at a time. The Dow Jones Industrial Average soared more than 900 points on Wednesday. Both the Nasdaq and the S&P 500 Index jumped about 3%.
Scott Horsley, NPR News, Washington.
(SOUNDBITE OF BRAD MEHLDAU'S "GOT ME WRONG" Transcript provided by NPR, Copyright NPR.
