Second, inflation is too high. It is higher than we expected, and it’s going to be elevated for longer than we previously thought. Third, we need higher interest rates. Our policy interest rate is our primary tool to keep the economy in balance and bring inflation back to the 2% target. This morning we raised our policy rate by 50 basis points to 1%.
Even so, from time to time monetary policy settings have been influenced by the perception of a potential for serious economic and financial dislocation.