Inflation and rate hikes, the Fed chairman: “A recession in the US is certainly possible”. Biden runs for cover on gasoline

A recession it is “certainly a possibility” but the Fed – his goodness – he’s not trying to provoke her. Word of the chairman of the Federal Reserve Jerome Powell that before the US Senate admitted that one of the side effects of the cycle of increases in taxi started is a sharp slowdown in the economy. But “our goal”, however “difficult” to achieve, he said, is and remains a “soft landing“. In short, from the high altitude of ultra-expansive policies we must return to the ground. It is “essential” to bring inflation back to 2%: “we cannot fail”. Meanwhile Joe Biden, for which price increases are a big problem in view of elections of midterm, is preparing to ask Congress for one three-month suspension of federal gasoline taxes against the expensive fuel that weighs so much on the pockets of Americans now that the summer season begins. A measure to favor families but which has already met with harsh criticism from Republicans and part of the Democrats.

Trying to reassure the health of the US economy, defined as “very strong“And able to tolerate a tighter monetary policy, the Fed chairman reiterated the central bank’s determination to vigorously fight ainflation that runs and that leaves no respite to the Americans. And that, he notes, could hold further surprises on the upside. Wall Street reacted cautiously, but the Asian and European stock exchanges that were open during the speech went negative and closed in red, with Milan black jersey of the Old Continent. Piazza Affari black shirt, also thanks to the slip of Saipem under great pressure following the discount on the capital increase. The fears of a possible recession have been making the markets nervous for days, worried about the consequences of the “hawk” central banksprimarily the Fed and the ECB, on a global economy struggling with the uncertainty of war in Ukraine and with the global price rush triggered by the pandemic.

Powell, explaining to US senators that the Fed aims to cool growth and demand while safeguarding the recovery underway, acknowledged that the “events of the last few months” have made it more difficult to achieve the goal of a soft landing. “The chances of a recession at the moment they are not particularly high“, However, he assured. Rate hikes are “appropriate” even if they will not bring down the prices of “food and of gas“.
Powell avoided questions from senators about the effects of fiscal policy on the economy. “It’s not our job”, he has gone unmarked on more than one occasion. The Fed decides on the “basis of economic data” and will decide on the speed of rate hikes at each meeting trying to communicate as clearly as possible to avoid surprises.

An explanation that therefore leaves the possibility of a interest rate increase of 0.75% at the next meeting in July. Whatever the extent of the rise, it will be, Powell observes, a necessary move because “history teaches us” that the weakest pay the heaviest price of the inflation rush. Words that did not break through the anti-Wall Street Democratic senator, Elizabeth Warren. “Do you want to know what’s worse than high inflation and low unemployment?” She attacked him during the hearing in the Senate. “There’s a’high inflation and a recession with millions of people out of work. I hope the Fed will consider that before throwing the economy off the cliff. “

Leave a Comment