Fed Chair Powell Signals More Rate Hikes in 2025 Amid Inflation Battle

Federal Reserve Chair Jerome Powell will face tough questions from Senator Elizabeth Warren, who warns that aggressive rate hikes risk pushing the U.S. economy over the edge.

On Tuesday, Federal Reserve Chair Jerome Powell is scheduled to address Congress, emphasizing that additional increases to the central bank’s benchmark interest rate are essential to control inflation—a statement that may face resistance from some lawmakers.

Appearing before the Senate Banking Committee, Powell will present the Fed’s semi-annual monetary policy report. Released last week, the report highlights that Federal Reserve officials believe continued rate hikes are necessary to tame inflation, which has proven more persistent than anticipated.

Senator Elizabeth Warren, a progressive Democrat from Massachusetts and a member of the committee, is expected to challenge Powell. She has criticized the Fed’s rate hikes, which aim to cool inflation by slowing economic activity, even at the cost of weakening the robust labor market.

“If the Fed continues with these extreme interest rate increases, it risks pushing the entire economy off a cliff,” Warren warned recently, according to Bloomberg.

This month marks the one-year anniversary of the Fed’s aggressive effort to combat inflation that surged during the economic recovery from the pandemic. Since March 2023, the Fed has steadily raised its benchmark interest rate from near zero to a range of 4.5%–4.75%, the highest since 2007.

These rate hikes have helped ease inflation somewhat. Consumer prices peaked at an annual rate of 9.1% in June 2022—the highest since 1981—but have since declined to 6.4% in January 2024. However, the slowdown in inflation is slower than the Fed’s target of 2%, indicating that price pressures remain substantial.

Recent economic data from February revealed inflation rates higher than expected, alongside stronger consumer spending and hiring, suggesting the economy is resisting the Fed’s tightening measures. This has led officials to signal plans for further rate increases and maintaining higher rates for a longer period.

Christopher Waller, a member of the Fed’s policy committee, acknowledged last week, “Recent data challenges the earlier view that we were making significant progress in moderating economic activity and reducing inflation.”

During his June 2023 testimony, Powell faced scrutiny from Warren, who questioned whether the rate hikes effectively address inflation’s root causes, such as supply chain disruptions and geopolitical tensions like the war in Ukraine—factors beyond the Fed’s control.

Warren stated, “The Fed cannot control the main drivers of rising prices but can slow demand by increasing unemployment and reducing family incomes. What’s worse than high inflation with low unemployment is high inflation combined with a recession and millions out of work.”

Meanwhile, Republican lawmakers emphasize the toll inflation takes on lower-income families and advocate for decisive action to rein in price increases.

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