The Chicago Journal

While Inflation Remains High, Jerome Powell Believes a Recession is Unlikely

While inflation has been the topic on everyone’s lips for the past couple months as many fear it would lead to recession, Jerome Powell believes that while there’s a possibility of it happening; he says it’s most unlikely.

On Wednesday, Powell addressed the Senate Banking Committee while banks faced growing pressure to combat inflation after the Fed ordered the largest interest rate increase last seen 28 years ago.

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“We need to get inflation back down to 2%,” the chairman told lawmakers. “We’re using our tools to do that. And the public should believe that we will get inflation back down to 2% over time.”

Sen. Warren believes that we could see an increase in borrowing costs, which would result in more layoffs and do little to fix the supply shocks behind high gas prices or groceries.

“You know what’s worse than high inflation and low unemployment?” Warren asked. “It’s high inflation and a recession with millions of people out of work. I hope you’ll reconsider that, before you drive this economy off a cliff.”

Powell reiterated that the economy is at an advantage to endure higher interest rates, but he also acknowledged that the Russian invasion and lingering supply-chain problems add to the risk of an economic slowdown.

“It’s certainly a possibility. It’s not our intended outcome at all, but it’s certainly a possibility,” said Powell. “We’re not trying to provoke – and I don’t think that we will need to provoke – a recession. But we do think it’s absolutely essential that we restore price stability, really for the benefit of the labor market as much as anything else.”

Though many are forecasting recessions, Fed Chair Powell doesn’t see the risks to be particularly high, saying it’s difficult to predict recessions.

“The U.S. economy for now is strong. Spending is strong. Consumers are in good shape. Businesses are in good shape,” reassured Powell. “Monetary policy is famously a blunt tool. And there’s risk that weaker outcomes are certainly possible. But they’re not our intent.”

The Federal Reserve has been called out for not doing enough to control inflation despite recent increases in mortgage rates. This blame can also be attributed to the $1 trillion relief bill that was passed last year, which fueled consumer demand.

Jerome Powell and other officials admit they misjudged the severity of inflation. He assured people of his determination to bring prices under control.

“We have the tools and the resolve and hopefully the judgment to accomplish that task,” said Powell.

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