Saturday, October 1, 2022
Home BUSINESS Message from US Fed Chairman Powell: Fighting Inflation May Cause a Recession

Message from US Fed Chairman Powell: Fighting Inflation May Cause a Recession

The Federal Reserve delivered its most telling estimate on Wednesday of what it will take to finally tame painfully high inflation: slower growth, higher unemployment and potentially a recession.

At a news conference, Chairman 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 succeed in slowing growth enough to curb inflation, but not so much as to cause a recession seems increasingly unlikely.

“The chances of a soft landing,” Powell said, “are likely to diminish” as the Fed steadily raises borrowing costs to curb the worst run of inflation in four decades.

“Nobody knows if this process will lead to a recession or, if so, how significant that recession would be.” Before Fed policymakers consider stopping their rate hikes, he said, they would need to see continued sluggish growth, a “modest” rise in unemployment, and “clear evidence” that inflation is returning to its 2020 target. 2 percent.

“We have to put inflation behind us,” Powell said. “I wish there was a painless way to do it. there isn’t.” Powell’s comments followed another substantial three-quarter point rate hike, the third in a row, by the Fed’s policymaking committee.

His latest action brought the Fed’s key short-term rate, which affects many consumer and business loans, to 3.25 percent from 3. That is its highest level since early 2008.

The drop in gasoline prices has slightly reduced headline inflation, which was still a painful 8.3 percent in August compared to a year earlier. Those falling prices at the gas pump could have contributed to a recent surge in President Joe Biden’s public approval ratings, which Democrats hope will improve his prospects in November’s midterm elections.

On Wednesday, Fed officials also forecast more huge hikes, raising their benchmark rate to about 4.4 percent by the end of the year, a full point higher than they had forecast in June.

And they hope to raise the rate again next year, to about 4.6 percent. That would be the highest level since 2007.

By raising lending rates, the Federal Reserve makes it more expensive to get a mortgage, car or business loan. So consumers and businesses presumably borrow and spend less, cooling the economy and slowing inflation.

In their quarterly economic forecasts, Fed policymakers also projected that economic growth will remain weak for years to come, with unemployment rising to 4.4 percent by the end of 2023, up from its current level of 3 .7 percent.

Historically, economists say, whenever unemployment has risen by half a point for several months, a recession has always followed.

RELATED ARTICLES

Security concerns overshadow Europe’s first new gas link in decades

The pipeline, along with new terminals in Poland and Latvia to receive shipments of liquefied natural gas and new regulations to increase interdependence and...

UK ruling blames social media for teen suicide

In January 2019, Mr. Russell went public with Molly's story. Incensed that his young daughter could see such grim content so easily and...

The pandemic is boosting sellers of traditional medicine

Aeconomic recession It is a bad time to get sick, especially in poor countries. As conventional drugs become scarce and expensive, desperate patients...

LEAVE A REPLY

Please enter your comment!
Please enter your name here

- Advertisment -

Most Popular

UCLA finds the clutch gene: 4 takeaways from the win over Washington

They are the plays that separate the good teams from the ones that have a way to go.They're also the ones UCLA struggled to...

Eli Manning trolls bow over broken yardage record

Friday night was one of the record books...

‘I’d rather be up here’: Urban Meyer recalls Ohio State Football’s 2017 loss to Iowa

Urban Meyer tour the Big Ten with FOX's "Great Midday Start" continued Saturday, bringing the former Ohio State head football coach back to Iowa...