When questioned on June 22nd during a Senate Banking Committee hearing, Federal Reserve Chair Jerome Powell stated the U.S. might get in into an economic downturn. Challenged about 40-year-high inflation and the Fed raising rate of interest in reaction, Powell stated he could not understand for sure however stated an economic downturn, specified as a substantial decrease in financial activity with time, is possible.
“Do you agree with the perspective that if interest rates go too high, too fast, that could drive us into a recession,” U.S. Sen. Jon Tester, D-Mont., Montana asked.
“It’s certainly a possibility, it’s not our intended outcome at all, but it’s certainly a possibility,” Powell responded.
Numerous senators continued to ask Powell what the Fed’s strategy was to attend to the problems triggered by inflation. Powell stated the Fed would continue increasing the rate of interest to match supply and demand.
“We anticipate that ongoing rate increases will be appropriate,” he said.
U.S. Sen. Elizabeth Warren, D-Okla., asked Powell, particularly how increasing rates of interest would help to reduce the impacts of inflation if doing so would not reduce gas or food rates. Powell reacted by stating that the increasing rate of interest would try to decrease need so supply might catch up.
“Interest rates go up, people’s demand for goods and services … as a result of higher interest rates will moderate or decline so supply and demand can get into better balance,” Powell said.
U.S. Sen. Richard Shelby, R-Ala., advised Powell that he and other Republican senators had actually cautioned for over a year about the likelihood of inflation.
“Previously, you also acknowledged that the Fed got it wrong in thinking that inflation would be transitory. Yet myself and other members of this banking committee here have been warning about inflation for over a year,” Shelby said.
Shelby then asked what to get out of the Fed to repair the concern of inflation, and Powell reacted by stating that the Fed wants to bring back cost stability.
“Price stability is really the bedrock of the economy in this sense, in the sense that you really cannot have a sustained period of maximum employment, our other coequal goal, you can’t have that without price stability, and so we must, must, restore price stability and we will,” Powell said.
When U.S. Sen. Thom Tillis, R-N.C., asked if President Joe Biden’s $1.9 trillion financial plan had any impact on inflation rates, Powell stated he didn’t wish to judge.
“It’s really not our job to, you know, pass judgment,” Powell said.
Later on, Powell stated inflation is not merely a U.S. issue but rather a worldwide one.
“Inflation is very much a global phenomenon. If you look at comparable large advanced economies like ours, you’ll see inflation rates that are quite similar to ours,” Powell added.
China’s no COVID-19 policy has actually added to the world’s high inflation rates, and the economy hasn’t understood the complete results, he included.
“We really, we don’t think we’ve seen the full effect of the lockdowns that we’ve had, but so, we’ll expect to be seeing some negative effects on bottlenecks,” Powell said.
H/T Just The News
