Federal Reserve chief Jerome Powell said a U.S. recession is “certainly a possibility” and warned that preventing one would depend primarily on circumstances beyond the Federal Reserve’s control. In his testimony before the Senate Banking Committee on Wednesday, the Fed chairman acknowledged that it is now more difficult for the central bank to control soaring inflation while maintaining a robust labor market.
Although he admitted that external variables like the conflict in Ukraine and China’s Covid-19 policy could further cloud the picture, he suggested that the United States was resilient enough to withstand tighter monetary policy without getting into depression.
“We need to bring inflation down to 2%,” Powell told lawmakers. “We are using our tools to do that. And the public should believe that we will bring inflation down to 2% over time.”
“You know what’s worse than high inflation and low unemployment?” said Warren. “It’s high inflation and a recession with millions out of work. I hope you reconsider that before you knock this economy off a cliff.”
“It’s definitely a possibility,” Powell said. “It’s not our intended outcome at all, but it’s certainly a possibility.”
“We are not trying to cause – and do not think we will need to cause – a recession,” he added. “But we think it’s absolutely essential to restore price stability, really for the benefit of the labor market as much as anything else.”
While acknowledging the likelihood of an economic slowdown is heightened by the ongoing conflict in Ukraine and ongoing supply chain issues, Powell stressed that the economy is well positioned to manage interest rates. higher.
Forecasters are spotting thunderclouds on the horizon more frequently. The probability of a recession over the next 12 months is now 44%, down from 28% in April, according to economists polled by The Wall Street Journal.
Although he said recessions are notoriously difficult to predict, Powell said he doesn’t think the risk is particularly significant.
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