Powell Says US Economy is in Strong Shape, and Fed Can Avoid Recession

    Bloomberg News reports that Federal Reserve Chair Jerome Powell stated that the economy in the US is in excellent and robust shape. It is said that the central bank can bring down inflation to 2% while preserving a solid labor market, although this task is becoming more challenging of late.

    The possibility of avoiding recession

    He also promised that he would ensure that the rapid increase in the price does not influence, revealing that transiting from an environment of low inflation to a higher inflationary environment will not be allowed.

    Powell also said that it is hoped that growth will continue to remain positive while speaking at the panel discussion on Wednesday at the annual forum policy of the European Central Bank in Sinatra, Portugal. Business and household finances are in great shape, and if the overall scenario is considered, it is strong enough to survive the tighter monetary policy.

    Increasing interest rates without triggering a recession is its main aim and they believe that there are ways by which the same objectives can be met. He commented this month after Fed increased interest rates on June 15th by as much as 75 basis points, which has been recorded as the biggest hike in 30 years.

    Bloomberg News reports that Powell is signaling another move of the same size or 50 basis point increase is on the cards when they meet in late July again. Powell, along with his colleagues are, aggressively fighting inflation which is the highest in 40 years and has been subjected to a lot of criticism that they had for long left the monetary policy too easy when the economy was in the process of recovery from Covid-19. The Fed had increased the rates by 1.5 percentage points in the current year, and there is a forecast by the officials for a hike of about 1.75 points for cumulative tightening in the future in 2022.

    Bloomberg News reports that when Fed was enquired about the yield curve by Francine Lacqua, the panel moderator of Bloomberg Television, Powell said that right now, it is not a top-line worry and that the focus of the Fed is to curb inflation.

    The move to the higher rates has caused the financial markets to doldrums as the investors’ fret could give rise to a recession. About one-third of the economists’ predictions imply that there might be a recession in the next two years.

    Powell has spoken on the panel with the Governor of the Bank of England, Andrew Bailey, and ECB President, Christine Lagarde. The three central banks have been putting in a lot of effort trying to bring down inflation, which has assumed a greater form due to disruptions in the supply chain due to Covid-19 and the escalating price of food and energy prices due to the Ukraine-Russian war.



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