Fed Chair Jerome Powell: Rate hikes could cause higher unemployment

Federal Reserve Chairman Jerome Powell speaks at the Senate Banking, Housing, and Urban Affairs Hearing on Semiannual Monetary issues on Capitol Hill in Washington, D.C., on Wednesday. Photo by Tasos Katopodis/UPI Federal Reserve Chairman Jerome Powell testifies in the Senate on Wednesday to deliver the Fed's semiannual report on the economy, on Capitol Hill in Washington, D.C. Powell told a House committee Thursday that the Fed's interest rate hikes could cause higher unemployment as it moves to control inflation. Photo by Tasos Katopodis/UPI A trader is seen on the floor of the New York Stock Exchange on Wall Street in New York City on June 14. Inflation in the U.S. has been running near 8% in recent months, which is far above the Federal Reserve's target of 2%. Photo by John Angelillo/UPI Fed Chairman Jerome Powell said at a Senate hearing on Wednesday that the U.S. economy remains strong amid difficult conditions. He added that a recession is possible, but unlikely. File Photo by John Angelillo/UPI Inflation in the U.S. has largely been driven by rising energy prices, such as gasoline. According to AAA, the national average on Thursday was $4.94 per gallon, which was a decrease of about 2 cents from Wednesday. File Photo by John Angelillo/UPI The Charging Bull Statue is seen near the New York Stock Exchange on Wall Street in New York City. Fed Chairman Jerome Powell told a Senate hearing on Wednesday that the domestic economy is in good shape and the Federal Reserve will order more interest rate hikes before the end of 2022 to keep inflation at a minimum. File Photo by John Angelillo/UPI

June 23 (UPI) -- Federal Reserve Chairman Jerome Powell testified in the House on Thursday that aggressive interest rate hikes by the Fed to tame inflation could cause unemployment to rise.

"There is a risk that unemployment will move up, from what is an historically low level though," Powell told the House Financial Services Committee, according to CNN.

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Powell said the Fed's interest rate increases are designed to drive growth down to a more sustainable level to give the supply side time to catch up with demand.

"Making appropriate monetary policy in this uncertain environment requires a recognition that the economy often evolves in unexpected ways," Powell said in a statement delivered to both the House and Senate. "Inflation has obviously surprised to the upside over the past year, and further surprises could be in store."

As head of the U.S. central bank, Powell led the move last week to increase key interest rates by 0.75 percentage point, which was the largest one-time hike since 1994. The move is intended to control rising inflation by reducing consumer spending.

Powell's appearance on Thursday completed two days of congressional testimony on the state of the economy.

He appeared in the Senate on Wednesday to deliver the Fed's outlook -- which said U.S. markets have remained "strong" in the face of difficult conditions, such as rising gas prices.

"At the Fed we understand the hardship that high inflation is causing. We are strongly committed to bring inflation back down and we're moving expeditiously to do so," Powell told the Senate banking committee Wednesday.

"We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses."

In the Senate, Powell also said he expects more interest rate hikes -- probably at each of the Fed's remaining four policy meetings in 2022. The Federal Reserve's next policy meeting is scheduled for July 26-27, and additional meetings will be held Sept. 20-21, Nov. 1-2 and Dec. 13-14.

Powell said on Wednesday during Senate testimony that a U.S. recession is "possible," but unlikely.

"The U.S. economy for now is strong. Spending is strong. Consumers are in good shape. Businesses are in good shape," he told the Senate banking committee. "Monetary policy is famously a blunt tool, and there's a risk that weaker outcomes are certainly possible. But they are not our intent."