Jerome Powell, the chair of the Federal Reserve has spoken out against inflation and believes that while there’s a possibility for it to lead into recession; he doesn’t think this will happen.
Powell addressed the Senate Banking Committee while the bank faced growing pressure to combat inflation on Wednesday, one week after the Fed ordered the largest interest rate increase in over 28 years.
“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.”
As Sen. Elizabeth Warren noted, an increase in borrowing costs could lead to a surge of layoffs with little help for those struggling at the pump and grocery store levels.
“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.”
The economy is at an advantage to withstand higher interest rates, according to Jerome Powell. But he is also aware that the Russian invasion and lingering supply-chain problems can add uncertainty.
“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.”
It is difficult to predict when a recession will come, but Powell doesn’t think it’s as high risk this time.
“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.”
Because of the high mortgage rates, some Republicans on the committee are blaming last year’s $1.9 trillion relief bill for fueling consumer demand and increasing inflation within America’s economy.
Jerome Powell and other officials admit they misjudged the severity of inflation. But Chairman Jerome is committed to bringing prices under control.
“We have the tools and the resolve and hopefully the judgment to accomplish that task,” said Powell.