Powell said he could not guarantee a “soft landing” because the Fed was in control

Jerome Powell, chairman of the U.S. Federal Reserve, took a break during a news conference after the Federal Open Market Committee (FOMC) meeting in Washington, D.C., on Wednesday, May 4, 2022.

Al Drago | Bloomberg | Getty Images

Federal Reserve Chairman Jerome Powell warned on Thursday that controlling inflation could cause some economic pain, but it remains his top priority.

Powell said he could not promise a so-called soft landing for the economy as the Fed raises interest rates to reduce ongoing inflation near their fastest pace in more than 40 years.

“So a soft landing is actually keeping the labor market strong, with only 2% coming back to inflation. And for some reason, achieving that at the moment is quite challenging,” the central bank chief said in an interview with Marketplace. .

He noted that with a tight labor market, increasing wages, avoiding recessions that often follow aggressive policy tightening will be a challenge.

“So it will be challenging, it will not be easy. No one here thinks it will be easy,” he said. “Still, we think there’s a way … to get us there.”

The remarks were made the same day the Senate unequivocally confirmed Powell for a second term, a move that came almost seven months after President Joe Biden submitted his first nomination.

At the top of his second-term priority list is controlling inflation, which was 8.3% year-on-year in April, more than 40 years after it was posted in March.

The Fed approved a half-percentage point interest rate hike last week, following a quarterly increase in March. Markets expect the rate-setting Federal Open Market Committee to raise another half-point in June and keep the benchmark rate rising until the end of the year.

For his part, Powell said he understands the additional pain that could cause the rate hike, but said the Fed needs to act aggressively.

“Our goal, of course, is to keep inflation down to 2% without putting the economy in recession, or to keep the labor market fairly strong,” he said. “That’s what we’re trying to achieve. I think one thing we can’t really do is fail to restore price stability. Nothing works in economics, economics doesn’t work for anyone without price stability.”

Powell has faced some criticism for delaying the Fed from raising rates and halting its bond-buying activities despite inflation mounting. Moreover, at his post-meeting press conference last week, he made remarks that were interpreted as a more aggressive move, such as an increase of 75 basis points off the table.

He said in a Marketplace interview that he was not sure “how much difference it would make” to work faster, adding that “we tried our best.”

“Now, we see the picture clearly and we are determined to use our tools to restore price stability,” Powell said.

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