Why the recession would be for Powell the price to pay for inflation in the US


At the meeting of September 21, the Fed announced the increase in the interest rate by 0.75%. It is the third consecutive increase of this type in the year after the increases in June and July

Photo: Drew Angerer/Getty Images

Officials of the Federal Reserve (Fed) have shown in their monetary policies some signs that they are willing to tolerate an economic recession in the United States in their attempt to control inflation and bring it to their 2% target.

In the most recent meeting on Wednesday, September 21, the Fed announced the increase in the interest rate by 0.75%. This is the third consecutive increase in the year after the increases in June and July. With this the base rate rises to a range of 3%-3.25%, the highest since early 2008.

Policymakers, who have been criticized for acting too late, are moving aggressively to tackle the inflation problem in the country. with another forecast of 1.25% adjustment before the end of the year.

The Fed’s aggressive measures, which come hand in hand with the cut in unemployment projections and estimates of below-trend growth, have been translated by some specialists as signs that a recession is coming.

Although Fed officials aren’t explicitly projecting a recession, Chairman Jerome Powell’s rhetoric about rate hikes has sharpened in recent months. At the recent meeting he said that, “Nobody knows if this process will lead to a recession or if so how significant that recession would be.”

“The chances of a soft landing are likely to diminish to the extent that policy needs to be tightened or restrictive longer. Nevertheless, we are committed to bringing inflation down to 2% again”said.

Early in the year, when rate hikes began, Powell repeatedly said the nation’s economy was strong, which would protect families from feeling the ravages of a cooling economy.

Today the median forecast among 19 Fed officials is for unemployment to hit 4.4% next year and stay there through 2024. However, these forecasts are weighted upwards with interest rates reaching 4.4% this year and 4.6% in 2023. The effects could be greater for several families.

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Source-laopinion.com