Fed’s Powell abandons promise of ‘soft landing’ amid inflation fight

FAN Editor

Federal Reserve  Chairman Jerome Powell is seemingly walking away from the promise of a soft economic landing as the U.S. central bank tries to wrestle inflation under control with the most aggressive interest rate hikes in decades.

For months, Powell has argued that a soft landing – the sweet spot between curbing inflation without crushing growth – is possible, but he seemed to abandon that stance on Wednesday. 

Speaking to reporters in Washington after the Fed voted to lift the benchmark federal funds rate by 75 basis points for the third straight month, Powell conceded that a recession is possible and that securing a soft landing will be “very challenging,” though he cautioned that no one knows if the tightening campaign will lead to a downturn, and if so how significant it will be. 

“The chances of a soft landing are likely to diminish to the extent that policy needs to be more restrictive, or restrictive for longer,” he said. “Nonetheless, we’re committed to getting inflation back down to 2%. We think a failure to restore price stability would mean far greater pain.”

FEDERAL RESERVE RAISES INTEREST RATES BY 75 BASIS POINTS FOR THIRD STRAIGHT MONTH

Federal Reserve Chairman Jerome Powell

Fed Chairman Jerome Powell arrives to speak at a news conference following a Federal Open Market Committee meeting in Washington, D.C., on Wednesday, Sept 21, 2022. (Sarah Silbiger/Bloomberg via Getty Images / Getty Images)

In addition to the large rate hike, Fed officials laid out an aggressive path of rate increases for the remainder of the year. New economic projections released after the two-day meeting show policymakers expect interest rates to hit 4.4% by the end of the year, suggesting that another three-quarter percentage point increase is on the table. 

Officials expect to continue raising rates in 2023, before stopping at a termination rate of 4.6% – well into restrictive territory – and eventually modestly lowering rates beginning in 2024. Powell said the current range of 3.0% to 3.25% is already at a point that may be considered “restrictive.”

BILLIONAIRE DAVID RUBENSTEIN WARNS INFLATION WILL BE ‘DIFFICULT’ FOR THE FED TO REDUCE

The updated forecasts also showed unemployment climbing to 4.4% by the end of next year, up from the current rate of 3.7%. That’s significantly higher than June, when policymakers saw the jobless rate inching up to 3.7%. Estimates for economic growth, meanwhile, were marked down to 1.2% in 2023 and 1.7% in 2024. 

“We have got to get inflation behind us,” Powell said. “I wish there were a painless way to do that. There isn’t.”

Economists widely agree the risks of a recession climbed considerably this year and that avoiding a downturn in the near future will be increasingly difficult as the Fed tightens monetary policy.

CLICK HERE TO READ MORE ON FOX BUSINESS

“With the new rate projections, the Fed is engineering a hard landing – a soft landing is almost out of the question,” said Seema Shah, chief global strategist of Principal Global Investors. “Powell’s admission that there will be below-trend growth for a period should be translated as central bank speak for ‘recession.’ Times are going to get tougher from here.”

Free America Network Articles

Leave a Reply

Next Post

3/29: CBSN AM

3/29: CBSN AM – CBS News Watch CBS News Pres. Trump: “The Russia hoax is finally dead”; Perfect NAA Tournament bracket busted View CBS News In Be the first to know Get browser notifications for breaking news, live events, and exclusive reporting. Not Now Turn On Free America Network Articles