Search
Wednesday, November 30, 2022

‘No guarantee’ Fed can control inflation without hurting jobs, warns Powell

ECB Forum on Central Banking in Sintra

WASHINGTON ( Associated Press) – Federal Reserve Chairman Jerome Powell said there is “no guarantee” that the central bank can overcome runaway inflation without hurting the job market.

Speaking Wednesday at a European Central Bank forum in Sintra, Portugal, Powell reiterated his hope that the Fed could achieve a so-called soft landing — slowing the economy and reining in consumer price growth without causing a recession and rapid growth. to increase interest rates. increase in the unemployment rate.

watch: Federal Reserve implements highest interest rate hike in decades to tackle inflation

“We believe we can do that. That’s our goal,” he said. But the Russian invasion of Ukraine, he said, made the job more difficult by disrupting commerce and raising the prices of food, energy and chemicals. Had given.

“It’s been tough,” Powell said. “The roads have become narrow.”

ECB President Christine Lagarde echoed the “major effects” of the energy shocks, which are rippling around the world but felt acutely in Europe due to dependence on Russian oil and natural gas. She also pointed to Europe’s proximity to the war in Ukraine and how the Bank’s assessment of inflation “greatly underestimated energy”.

The ECB and the Fed were slow to recognize the threat of inflation that had emerged just a year ago. He believed rising prices were a temporary result of a supply chain malfunction as the economy bounced back from the brief but devastating coronavirus slowdown of 2020 with unexpected momentum.

But inflation kept rising. The Fed raised its short-term benchmark rate in March and May and appeared poised for another half percentage-point increase at its June 14-15 meeting.

Then, the Labor Department reported that consumer prices rose 8.6% in May from a year earlier – the biggest jump since 1981. The Fed responded by raising the rate to three-quarters of a percent – the biggest increase since 1994.

Europe’s central bank is behind the Fed but said it would raise rates for the first time in 11 years in July and again in September to target inflation running at a record 8.1% in 19 countries using the euro. In a speech inaugurating the ECB forum on Tuesday, Lagarde said the bank will go with the hike gradually, but keep its options open to “inflate” inflation if it grows faster than expected.

Increasingly, economists worry that higher rates could push the economy into recession.

However, Powell pointed to a strong labor market – unemployment near a half-century low of 3.6% – and noted that most households and businesses had healthy savings.

“Overall,” he said, “the US economy is well positioned to withstand tighter monetary policy.”

Lagarde noted that the same was true of Europe.

World Nation News is a digital news portal website. Which provides important and latest breaking news updates to our audience in an effective and efficient ways, like world’s top stories, entertainment, sports, technology and much more news.

Latest News

Related Stories

    Leave a Reply

    Your email address will not be published. Required fields are marked *

    Thanks for submitting your comment!