Powell’s Stark Message: Inflation Fight May Cause Recession
WASHINGTON — The Federal Reserve delivered its bluntest reckoning Wednesday of what it will take to finally tame painfully high inflation: Slower growth, higher unemployment and potentially a recession, according to an Associated Press report.
Speaking at a news conference, Chair Jerome Powell acknowledged what many economists have been saying for months: That the Fed’s goal of engineering a “soft landing” — in which it would manage to slow growth enough to curb inflation but not so much as to cause a recession — looks increasingly unlikely.
“The chances of a soft landing,” Powell said, “are likely to diminish” as the Fed steadily raises borrowing costs to slow the worst streak of inflation in four decades. “No one knows whether this process will lead to a recession or, if so, how significant that recession would be.”
Before the Fed’s policymakers would consider halting their rate hikes, he said, they would have to see continued slow growth, a “modest” increase in unemployment and “clear evidence” that inflation is moving back down to their 2% target.
“We have got to get inflation behind us,” Powell said. “I wish there were a painless way to do that. There isn’t.”
Powell’s remarks followed another substantial three-quarters of a point rate hike — its third straight — by the Fed’s policymaking committee. Its latest action brought the Fed’s key short-term rate, which affects many consumer and business loans, to 3% to 3.25%. That’s its highest level since early 2008.
Read the full Associated Press report.
Source: https://rvbusiness.com/powells-stark-message-inflation-fight-may-cause-recession/
