Rate hikes until inflation falls, Powell says

Chair Jerome Powell on Tuesday underscored the Federal Reserve’s determination to keep raising interest rates until there is clear evidence inflation is steadily falling — a highstakes effort that carries the risk of causing a recession.

The Fed’s increases in its benchmark shortterm rate typically lead to higher borrowing costs for consumers and businesses, including for mortgages, auto loans and credit cards.

“What we need to see is inflation coming down in a clear and convincing way,” Powell said in remarks to a Wall Street Journal conference. “And we’re going to keep pushing until we see that.”

Retail sales rise 0.9% in April

U.S. retail sales rose 0.9% in April, a solid increase that underscores Americans’ ability to keep ramping up spending even as inflation persists at nearly a 40-year high.

The increase was driven by greater sales of cars, electronics and at restaurants, the Commerce Department said Tuesday.

Even adjusting for inflation, which was 0.3% on a monthly basis in April, sales increased. Gas prices fell slightly last month, restraining inflation, after soaring in March in the aftermath of Russia’s invasion of Ukraine.

“Never bet against the U.S. consumer has always been a good adage,” said Paul Ashworth, chief U.S. economist at Capital Economics. “Despite the surge in prices weighing on their purchasing power, the U.S. consumer now appears to be single-handedly keeping the global economy afloat.”