US Federal Reserve Chairman Jerome Powell speaks during a press conference in Washington, DC on May 4, 2022.
jim watson | AFP | Getty Images
Federal Reserve Chairman Jerome Powell warned on Thursday that getting inflation under control could cause economic hardship, but remains his top priority.
Powell said he could not promise a so-called soft landing for the economy as the Fed raises interest rates to rein in price increases, which are near their fastest pace in more than 40 years.
“So a soft landing is really getting back to 2% inflation while maintaining a strong labor market. And it’s quite difficult to accomplish that right now, for a couple of reasons,” the official said. head of the central bank in an interview with Marketplace.
He noted that with a tight labor market driving up wages, avoiding a recession that often follows aggressive policy tightening will be a challenge.
“So it will be difficult, it won’t be easy. No one here thinks it will be easy,” he said. “Nevertheless, we believe there are pathways…to get us there.”
The remarks were released the same day the Senate overwhelmingly confirmed Powell for a second term, a decision that came nearly seven months after President Joe Biden first submitted the nomination.
High on his list of priorities for the second term will be controlling price inflation, which in April stood at an annual rate of 8.3%, just off a more than 40-year high recorded in March.
The Fed last week approved an interest rate hike of half a percentage point after a quarter-point hike in March. Markets expect the Federal Open Market Committee responsible for setting rates to increase another half point in June and continue to raise benchmark rates through the end of the year.
For his part, Powell said he understood the additional pain higher rates could cause, but said the Fed needed to act aggressively.
“Our goal, of course, is to get inflation down to 2% without the economy going into recession or, to put it that way, with a job market that remains pretty strong,” he said. . “That’s what we’re trying to achieve. I think the only thing we really can’t do is not restore price stability, though. Nothing in the economy is working, the economy is not working for nobody without price stability.”
Powell was criticized for the Fed’s delay in raising rates and halting its bond-buying program even as inflation rose. Additionally, at his post-meeting press conference last week, he made remarks that were interpreted as more aggressive moves, such as a 75 basis point raise, off the table.
He said in the Marketplace interview that he was “not sure what difference it would have made” to act faster, adding, “we tried our best.”
“Now we see the situation clearly and are determined to use our tools to bring us back to price stability,” Powell said.