Ovunc Kutlu
13 May 2022•Update: 13 May 2022
ANKARA
Describing the US’ record-high inflation as “painful,” Federal Reserve Chair Jerome Powell said a soft landing for the economy will be “challenging.”
“We understand that inflation is very painful, that the Fed is accountable to get inflation down to 2%, and that we have the tools and the strong desire to get inflation under control,” he said on American radio program Marketplace on Thursday.
“I will also say that the process of getting inflation down to 2% 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.”
Powell repeatedly said last year that inflation in the US is “transitory,” but consumer prices have continued to climb up, eventually reaching 8.5% in March – the highest annual increase in more than 40 years.
Behind the curve in getting inflation under control, the Fed started raising interest rates with a hike of 25 basis points in March and another 50 basis points last week.
The central bank’s hawkish stance, however, has sparked concern among investors, who believe the aggressive monetary tightening could cause a recession in the US economy.
Powell noted that it could be difficult to manage a soft landing – the process in which a central bank raises rates against high inflation and causes an economic slowdown, but avoids a recession.
“A soft landing is really just getting back to 2% inflation while keeping the labor market strong. And it’s quite challenging to accomplish that right now, for a couple of reasons,” he said.
The reasons Powell cited were the labor market being tight and inflation remaining very high.
“Whether we can execute a soft landing or not, it may actually depend on factors that we don’t control,” he said.
