Jay Powell said the US recession was “definitely a possibility” and warned that avoiding a fall now largely depends on factors outside the control of the Federal Reserve.
Speaking to the Senate Banking Committee on Wednesday, the central bank chairman acknowledged that the central bank is now the most challenging. To differentiate rising inflation While maintaining a strong job market.
He argued that the United States was flexible enough to withstand austerity monetary policy without going into recession, but acknowledged that external factors such as the war in Ukraine and China’s Govt-19 policy would further complicate the view.
“This is not our intention, but it is certainly a possibility,” Powell said, answering a question about the risk that the central bank’s plans to raise rates this year could lead to a recession.
He added that due to the “events of the last few months around the world”, the central bank is “very difficult now” to achieve its targets of 2 percent inflation and a strong labor market.
Referring to Russia’s invasion of Ukraine and rising commodity prices, he said, “The question of whether this can be achieved depends on factors beyond our control.” Due to the locking of China.
Lawmakers have repeatedly put pressure on Powell about the burden imposed by the central bank’s recent moves to fight inflation. It is now 8.6 percent, A maximum of four decades. The central bank accommodated last week The biggest The rise in interest rates since 1994 signifies its support for setting up a much stronger campaign to tighten monetary policy since the 1980s.
“Do you know what’s worse than high inflation and low unemployment? It’s high inflation and the recession that keeps millions of people out of work,” said Elizabeth Warren, a Massachusetts Democratic senator senator. “I hope you will reconsider this economy before pushing it off a cliff.”
Powell said in a separate exchange that there would be significant risks if inflation took root and the central bank failed to act to restore price stability.
“We know from history that the people we want to help, the low-income spectrum people, will now suffer from high inflation,” he said. “It hurts them more than anyone. We can not fail in that task.
At noon, the U.S. two-year Treasury yield, moving with interest rate expectations, fell 0.1 percentage points to 3.06 percent. U.S. stock indices rose 0.2 percent with the S&P 500.
Concerns about a possible recession have grown worse than expected Swelling Data for this month. When Powell said the US economy was “very strong and in a position to handle tight monetary policy”, he acknowledged that further inflation surprises “might be in stock”.
“So we need to be fast in responding to incoming data and emerging perspectives and try to avoid adding uncertainty to an already extraordinarily challenging and uncertain time,” he said.
Traders hit the benchmark Federal Reserve rate of approximately 3.6 percent by the end of the year, leading to a broad increase in borrowing costs worldwide. Powell said Wednesday that the tightening of financial conditions is having its intended impact and reducing demand.
Powell’s testimony comes at a crucial moment for the White House, which is competing with rising expectations of a sharp slowdown in growth ahead of November’s midterm elections. From many economists Pencil in a recession Within the next year.
“There is nothing inevitable about a recession,” President Joe Biden told reporters this week – a message from US Treasury Secretary Janet Yellen and National Economic Council Director Brian Dees.
Federal Reserve officials have begun preparing market participants for at least another 0.75 percentage point hike at their next meeting in July. Powell said Wednesday that the central bank should look into “compelling evidence” that inflation is moderate before its drive to raise interest rates.
Powell said future decisions about the central bank’s actions would be made “by meeting.”