Federal Reserve Chairman Jerome Powell warned Thursday that getting inflation under control could cause some economic pain but remains his top priority.
Powell said he couldn’t promise a so-called soft landing for the economy as the Fed raises interest rates to tamp down price increases running near their fastest pace in more than 40 years.
He noted that with a tight labor market pushing up wages, avoiding a recession that often follows aggressive policy tightening will be a challenge.
“So it will be challenging, it won’t be easy. No one here thinks that it will be easy,” he said. “Nonetheless, we think there are pathways ... for us to get there.”
The remarks were published the same day the Senate overwhelmingly confirmed Powell for a second term, a move that came nearly seven months after President Joe Biden first submitted the nomination.
On top of the list for his second-term priorities will be to control price inflation that in April ran at an 8.3% annual rate, just off a more than 40-year high posted in March.
Price stability is key
For his part, Powell said he understands the added pain that higher rates may cause, but said the Fed needs to act aggressively.
“Our goal, of course, is to get inflation back down to 2% without having the economy go into recession, or, to put it this way, with the labor market remaining fairly strong,” he said. “That’s what we’re trying to achieve. I think the one thing we really cannot do is to fail to restore price stability, though. Nothing in the economy works, the economy doesn’t work for anybody without price stability.”
Powell has come under some criticism for the Fed’s delay in raising rates and halting its bond-buying program even as inflation mounted. Moreover, at his post-meeting news conference last week, he made remarks that were interpreted as taking more aggressive steps, like a 75 basis point increase, off the table.
He said in the Marketplace interview that he’s “not sure how much difference it would have made” to act more quickly, adding, “we did the best we could.”
“Now, we see the picture clearly and we’re determined to use our tools to get us back to price stability,” Powell said.
