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The US Fed Trying To Combat Inflation, Avoiding Recession: Jerome Powell

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The US is dealing with an above 40 years high consumer inflation rate, which has surged by 8.6% YoY in the last month, according to the country's Labor Department data. The US Central Bank, the Federal reserve is solely committed to bringing the high inflation rate down. However, many analysts were expecting that the US can face a recession at the end of the present year.

 
The US Fed Trying To Combat Inflation, Avoiding Recession: Jerome Powell

Commenting on the matter, US Fed Chair Jerome Powell stated, "We are not trying to provoke, and I don't think we will need to provoke, a recession." He said this at a hearing before the U.S. Senate Banking Committee. But, even the Fed Chief could not avoid saying that a recession was "certainly a possibility". The recent supply chain bottlenecks and low manufacturing data that resulted in high inflation can cause the recession in the US, many economists believe. The US Fed was earlier trying to restrict the inflation rate to 2%, but failed miserably for a very long time after the pandemic started. The US central bank has again increased its interest rate by 75bps in the last FOMC meeting, and economists are expecting further rate hikes in the next meetings. In today's statement, Powell said that the ongoing increases in the Fed's policy rate would be appropriate, with the exact pace dependent on the economic outlook, and he declined to rule out a 100-basis-point move if it proved warranted, as Reuters reported.

Powell added, "It is essential that we bring inflation down if we are to have a sustained period of strong labor market conditions that benefit all." The US central bank, in the upcoming months, will be looking for "compelling evidence" of slowing price pressures before it eases up on the interest rate increases it kicked off 3 months ago, a Reuters report mentions.

Story first published: Thursday, June 23, 2022, 0:49 [IST]
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