WASHINGTON—Federal Reserve Chairman Jerome Powell said that while it will challenging, the Fed will be able to fight inflation over the next few years without causing a recession.
Powell’s comments, made just a week after the Fed raised rates for the first time in three years, were made during remarks to the National Association for Business Economics’ annual conference,
Powell told the group that he expects the Fed’s recent actions, combined with external economic factors should help rein in the inflation rate to 2%, which is the Fed’s annual target rate. The Fed chairman, calling it “grounds for optimism,” said the Fed can execute a slowing of the economy that cools price spikes but doesn’t necessarily lead to negative growth.
“Some have argued that history stacks the odds against achieving a soft landing,” stated Powell. “Soft, or at least soft-ish, landings have been relatively common in U.S. monetary history. In three episodes — in 1965, 1984 and 1994 — the Fed raised the federal funds rate significantly in response to perceived overheating without precipitating a recession.”
Many forecasters, along with signals from the Fed itself, anticipate the Fed will raise rates several times during 2022, although Russia’s invasion of Ukraine has raised the price of important commodities like oil, which may weigh on consumer spending and may decrease the need for more aggressive Fed action.
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