WASHINGTON (Reuters) – There is a risk U.S. Federal Reserve interest rate increases will slow the economy too much, but the bigger risk is persistent inflation that starts to let public expectations about prices drift higher, Fed chair Jerome Powell said Wednesday.
“The clock is kind of running on how long will you remain in a low-inflation regime … The risk is that because of the multiplicity of shocks you start to transition into a higher inflation regime and our job is to literally prevent that from happening and we will prevent that from happening,” Powell said at a European Central Bank conference.
While “there is a risk” the Fed slows the economy more than needed to control inflation, “I would not agree that is the bigger risk. The bigger mistake would be to fail to restore price stability.”
(Reporting by Howard Schneider; Editing by Alison Williams)
