Fed chief says recession 'a possibility' as bank hikes rates
(The Hill) - Federal Reserve Chair
Testifying before the
Inducing a recession is "not our intended outcome, but certainly a possibility," Powell said when asked by Sen.
"And frankly, the events of the last few months around the world have made it more difficult for us to achieve what we want," he added.
Powell's appearance before the committee comes amid growing concern over the outlook for the
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But the
When the Fed hikes interest rates, economic activity tends to slow as consumers and businesses feel the weight of higher borrowing costs. As spending declines, firms are often forced to keep prices stable or cut them, which throws cold water on inflation.
Powell said Wednesday the Fed will likely need to raise rates above a "neutral" level — one that neither stimulates nor constrains the economy — and to a "moderately restrictive" point. Fed officials expect to raise their baseline interest rate to a midpoint of roughly 3 percent by the end of the year, according to projections released last week.
"The other risk, though, is that we would not manage to restore price stability, and then we would allow this high inflation to get entrenched in our economy," Powell said.
"We know from history that it will hurt the people and we'd like to help—the people on the lower end of the income spectrum who suffer now from high inflation. That will hurt them more than anyone so that we can't fail on that task."
Both
"Inflation is like an illness and the medicine needs to be tailored to the specific problem. Otherwise, you can make things a lot worse and right now, the Fed has no control over the main drivers of rising prices," said Warren, who opposed Powell's recent reconfirmation.
'You know what's worse than high inflation and low unemployment? It's high inflation and a recession with millions of people out of work. And I hope you reconsider that before you drive this economy off a cliff."
Several
"As inflation continues to run rampant. I believe the
"The
Fed's commitment against inflation impacts stock markets
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