Fed Chair: Strong currency can curb inflation

The head of the US Federal Reserve has said that currency exchange rates can have the effect of curbing inflation.

The comment suggests that the central bank is comfortable with the dollar's appreciation on the back of the biggest interest rate hike in almost three decades.

Fed Chair Jerome Powell was testifying to the House Financial Services Committee on Thursday.

He said that changes in exchange rates are among the consequences of the Fed's rate hikes to curb inflation that hit a four-decade high.

A stronger dollar can reduce inflation by cutting import prices.

The greenback has risen sharply against the yen as the Fed pursues tightening while the Bank of Japan maintains monetary easing.

Powell also said that it is possible but not inevitable that accelerating the pace of tightening could lead to economic stagnation.

However, he did acknowledge that large rate hikes could reduce spending on houses and automobiles, and increase unemployment.