Powell: 'Soft' economic landing may be out of Fed's control - Albuquerque Journal

Powell: ‘Soft’ economic landing may be out of Fed’s control

WASHINGTON — Federal Reserve Chair Jerome Powell, fresh off winning Senate confirmation for a second term earlier in the day, acknowledged for the first time Thursday that high inflation and economic weakness overseas could thwart his efforts to avoid causing a recession.

For weeks, Powell has portrayed the Fed’s drive to raise interest rates as consistent with a so-called “soft landing” for the economy. Under that scenario, the Fed would manage to tighten borrowing costs enough to cool the economy and curb inflation without going so far as to tip the economy into recession.

But in an interview on American Public Media’s “Marketplace,” Powell conceded that that balancing act — which many economists have said they doubt the Fed can achieve — could be undercut by economic slowdowns in Europe and China.

“The question whether we can execute a soft landing or not — it may actually depend on factors that we don’t control,” the Fed chair said. “There are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so.”

Such comments reflect less confidence in avoiding a recession than Powell has previously conveyed. Just last week, he said at a news conference: “I think we have a good chance to have a soft or softish landing or outcome.”

On Thursday, he said that slowing inflation to the Fed’s 2% annual target — from its current 6.6%, according to the central bank’s preferred measure — “will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels.”

Europe’s economies are suffering from high inflation, exacerbated by Russia’s invasion of Ukraine and the resulting spike in natural gas and oil prices. Europe has been far more dependent on Russian energy supplies than the United States has been.

China’s strict COVID lockdown policies have shut down ports, hindering exports and slowing consumer spending in cities like Shanghai, where millions of Chinese have been largely restricted to their homes for weeks.

In his interview on “Marketplace,” Powell also seemed to suggest that the Fed would at least consider raising its benchmark rate by an extremely large three-quarters of a point if inflation failed to show signs of easing in the coming months. Last week, the stock market initially soared when Powell appeared to take a three-quarter-point rate hike off the table.

After repeating his comment from last week that half-point hikes were likely at each of the next two Fed meetings, in June and July, Powell added Thursday: “If things come in better than we expect, then we’re prepared to do less. If they come in worse than when we expect, then we’re prepared to do more.”

When asked if “do more” meant a three-quarter point hike, Powell said: “You’ve seen this committee adapt to the incoming data and the evolving outlook. And that’s what we’ll continue to do.”

___

This story was first published on May 12, 2022. It was updated on May 24, 2022 to correct a reference to NPR’s Marketplace. The Marketplace show is part of American Public Media, not NPR.

Home » News » Nation » Powell: ‘Soft’ economic landing may be out of Fed’s control


Albuquerque Journal and its reporters are committed to telling the stories of our community.

• Do you have a question you want someone to try to answer for you? Do you have a bright spot you want to share?
   We want to hear from you. Please email yourstory@abqjournal.com

taboola desktop

1
Fish and Wildlife changes Mexican wolf management
ABQnews Seeker
The U.S. Fish and Wildlife Service ... The U.S. Fish and Wildlife Service on Thursday finalized rules that change how the federal agency manages the endangered Mexican gray wolf.   The changes ...
2
Supreme Court: Biden can end Trump-era asylum policy
ABQnews Seeker
The Supreme Court said Thursday the ... The Supreme Court said Thursday the Biden administration can scrap a Trump-era immigration policy to make asylum-seekers wait in Mexico for hearings in U.S. ...
3
APD hopes to expand its Digital Intelligence Team
ABQnews Seeker
The Albuquerque Police Department hopes to ... The Albuquerque Police Department hopes to more than double its unit devoted to helping solve violent crimes through online sleuthing. The three-person Digital Intelligence ...
4
PRC orders customer rate credit for San Juan shutdown
ABQnews Seeker
PNM accused of trying to 'cheat' ... PNM accused of trying to 'cheat' customers out of coal-plant savings
5
A 'locked door ... opened'
ABQnews Seeker
Officials, conservation groups celebrate expansion of ... Officials, conservation groups celebrate expansion of NM Game and Fish Marquez Wildlife Management Area
6
Supreme Court limits EPA in curbing power plant emissions
ABQnews Seeker
In a blow to the fight ... In a blow to the fight against climate change, the Supreme Court on Thursday limited how the nation's main anti-air pollution law can be ...
7
Ethics officer clears former CYFD officials
ABQnews Seeker
No personal benefit found in awarding ... No personal benefit found in awarding of no-bid contract to California firm
8
Initial round of rebate checks sent to NM taxpayers
ABQnews Seeker
Relief aims to target inflation, gas ... Relief aims to target inflation, gas prices
9
Rep. Louis agrees to plea deal in DWI case
ABQnews Seeker
Other charges dropped after proof of ... Other charges dropped after proof of insurance, registration provided
10
Jose Armas: 1944-2022: Activist and scholar stood on his ...
ABQnews Seeker
Daughter notes her father 'knew what ... Daughter notes her father 'knew what he stood for' without compromise