“Unconditional” bids to combat inflation can spur unemployment

Federal Reserve Chairman Jerome Powell said Thursday that the central bank’s commitment to cool inflation is “unconditional.” May unemploy more Americans..

Powell testified at Capitol Hill 2 days in a row He faced a grill by members of the House Financial Services Commission seeking answers to the central bank’s efforts to combat decades of high inflation while trying to avoid a recession.

“We have an unsustainably hot labor market, far from our inflation target,” Powell said.

“We really need to restore price stability and bring inflation back to 2%, because without it we wouldn’t be able to sustain the maximum employment period when benefits would be very widespread and people’s wages would fall. “I’ve been eaten by inflation,” Powell added.

The Fed is scrambling to deal with inflation, which reached 8.6% in May. This is well above what economic policy makers consider to be acceptable.However, the move by the central bank to raise interest rates Three-quarter percentage points Earlier this month, the fear of a recession in policy tightening worsened.

The Fed is under great pressure to curb high inflation in the sky.
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Gas price
Gas prices rose to record levels in 2022.
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Powell acknowledged the risk, saying in a testimony at the Senate Commission the day before that the Fed is trying to avoid a recession, “it’s certainly possible.”

The Federal Reserve is expected to rise by at least half a percentage point in July, and if inflation persists, a similar rise is expected in the coming months.

The rate hikes so far have not had a significant impact on the employment market, with the national unemployment rate remaining at just 3.6% until May. However, Powell acknowledged that the Fed’s further actions could lead to more unemployment as companies seek to cut costs.

“We don’t have precision tools,” Powell said. “So there is a risk that the unemployment rate will rise from historically low levels. The labor market with an unemployment rate of 4.1% or 4.3% is still a very strong labor market.”

Worried NYSE traders
Investors are increasingly worried about the risk of recession.
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Powell also noted that the Fed’s efforts to bring inflation back to 2% while maintaining a strong labor market, the so-called “soft landing” that investors seek, have become “significantly difficult” in recent months. I admitted.

He quoted the effects of Russia’s invasion of Ukraine. This contributes to rising gas and food prices and supply chain disruptions.

“Unconditional” bids to combat inflation can spur unemployment

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