WASHINGTON — Federal Reserve Chair Jerome Powell said there’s “no guarantee″ the central bank can tame runaway inflation without hurting the job market.
Speaking Wednesday at a European Central Bank forum, Powell repeated his hope that the Fed can achieve a so-called soft landing — raising interest rates just enough to slow the economy and rein in surging consumer prices without sending the U.S. economy into a recession. He says “we believe we can do that.”
But he says Russia’s invasion of Ukraine made the job more difficult by disrupting commerce and driving up the price of food, energy and chemicals.
ECB President Christine Lagarde echoed the “major impact” of energy shocks.
At a hearing last week before the Senate Banking Committee, Powell said of a recession that, “It’s certainly a possibility. It’s not our intended outcome at all, but it’s certainly a possibility. And frankly the events of the last few months around the world have made it more difficult to achieve what we want, which is 2% inflation and still a strong labor market.”
US economy slipped 1.6% to start year; return to growth eyed
The U.S. economy shrank at a 1.6% annual pace in the first three months of the year even though consumers and businesses kept spending at a healthy pace, the government reported Wednesday in a slight downgrade from its previous estimate for January-March quarter.
It was the first drop in gross domestic product — the broadest measure of economic output — since the second quarter of 2020, in the depths of the COVID-19 recession, and followed a strong 6.9% expansion in the final three months of 2021.
Still, the negative number probably doesn’t signal the start of a recession, and economists expect growth to resume later this year.
Travis Pittman contributed to this report.