Moneycontrol PRO
you are here: HomeNewsPhotosWorld

US Federal Reserve willing to tolerate a recession for taming inflation: Key takeaways from Powell's presser

Fed Chair Jerome Powell has hinted that the central bank may be willing to tolerate a recession, to get inflation back in control. Here are some of the sharpest comments:

September 22, 2022 / 12:30 PM IST
Fed Chair Jerome Powell has hinted that the central bank may be willing to tolerate a recession, to get inflation back in control. Policy makers, criticized for being too late to realize the scale of the US inflation problem, are moving aggressively to catch up. Here are some of Powell's sharpest comments. (Image: AP)
Fed Chair Jerome Powell has hinted that the central bank may be willing to tolerate a recession, to get inflation back in control. Policy makers, criticized for being too late to realize the scale of the US inflation problem, are moving aggressively to catch up. Here are some of Powell's sharpest comments. (Image: AP)
They raised interest rates by 75 basis points on September 21 for the third time in a row and forecast a further 1.25 percentage points of tightening before year end. In addition, officials cut growth projections, raised their unemployment outlook and Chair Jerome Powell repeatedly spoke of the painful slowdown that’s needed to curb price pressures running at the highest levels since the 1980s.
They raised interest rates by 75 basis points on September 21 for the third time in a row and forecast a further 1.25 percentage points of tightening before year end. In addition, officials cut growth projections, raised their unemployment outlook and Chair Jerome Powell repeatedly spoke of the painful slowdown that’s needed to curb price pressures running at the highest levels since the 1980s.
On September 21, in his post-meeting press conference, Powell said a soft landing with only a small increase in joblessness would be “very challenging.” Powell told reporters after officials lifted the target range for their benchmark rate to 3 percent to 3.25 percent.
On September 21, in his post-meeting press conference, Powell said a soft landing with only a small increase in joblessness would be “very challenging.” Powell told reporters after officials lifted the target range for their benchmark rate to 3 percent to 3.25 percent.
The median forecast among the 19 Fed officials is for unemployment to reach 4.4 percent next year and stay there through 2024, from the current rate of 3.7 percent. But even that new level might still be too low. Almost all participants said risks to their new forecasts were weighted to the upside. They projected interest rates reaching 4.4 percent this year and 4.6 percent in 2023, before moderating to 3.9 percent in 2024.
The median forecast among the 19 Fed officials is for unemployment to reach 4.4 percent next year and stay there through 2024, from the current rate of 3.7 percent. But even that new level might still be too low. Almost all participants said risks to their new forecasts were weighted to the upside. They projected interest rates reaching 4.4 percent this year and 4.6 percent in 2023, before moderating to 3.9 percent in 2024.
Fed officials’ apprehension about their ability to bring down inflation is evident in other projections, too. Even amid a new rate-hike path, officials still don’t see inflation easing to their 2 percent target until 2025.
Fed officials’ apprehension about their ability to bring down inflation is evident in other projections, too. Even amid a new rate-hike path, officials still don’t see inflation easing to their 2 percent target until 2025.
Powell told reporters several times that a softer labor market may be necessary to sufficiently bring down demand. But he also pointed to higher savings rates and more money at the state level indicating that the economy is still reasonably strong, a “good thing” that he said would make it more resistant to a significant downturn. (With inputs from Bloomberg)
Powell told reporters several times that a softer labor market may be necessary to sufficiently bring down demand. But he also pointed to higher savings rates and more money at the state level indicating that the economy is still reasonably strong, a “good thing” that he said would make it more resistant to a significant downturn. (With inputs from Bloomberg)
Moneycontrol News