Economy may not hit soft landing target on May

Economy may not hit soft landing target on May

Federal Reserve Chairman Jerome Powell acknowledged for the first time on Thursday that high inflation and weak economies around the world could hamper his efforts to avoid triggering a recession.

For weeks, Powell has described the Fed's drive to raise interest rates as consistent with his goal of a "soft landing" for the economy. Under this scenario, the Fed would manage to tighten interest rates just enough to cool the economy but also contain inflation without tipping the economy into recession.

However, in an interview on NPR's "Marketplace," Powell acknowledged that that balancing act — which many economists say they doubt the Fed can achieve — could be hit by a downturn. economy in Europe and China.

"The question of whether we can do a soft landing - it really depends on factors over which we have no control," the Fed chair said. “There are major events, geopolitical events happening around the world, that will play a very important role for the economy over the next year or so.”

Such comments reflect a lack of confidence in avoiding a recession as the Powells have previously claimed. Just last week, he said in a press conference that “I think we have a good chance of achieving a soft landing.”

On Thursday, he said that moving inflation back to the Fed's 2% annual target - from the current 6.6%, according to the central bank's calculations - "would also include a number of issues." problem, but ultimately the worst will be if we fail to deal with it and high inflation persists in the economy."

Europe's economies are suffering from high inflation, exacerbated by the war between Russia and Ukraine. This war resulted in a spike in the price of natural gas and oil. Europe is more dependent on Russian energy supplies than the United States.

China's strict COVID lockdown policies have closed ports, hampered exports and slowed consumer spending in cities like Shanghai, where millions of Chinese have been restricted. to their homes for weeks.

In the interview with NPR, Powell also seemed to suggest that the Fed would at least consider raising the benchmark interest rate by three-quarters of a point if inflation shows no signs of abating in the coming months. Last week, the stock market initially shot up as Powell looked like he wouldn't consider the -point gain option.

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