×

Please verify

Watch LIVE

Fed chair Jerome Powell says US economy in 'pretty strong shape,' hopes to bring down inflation

HOME - MAIN FEATURED
Photo by Win McNamee/Getty Images

At the European Central Bank’s annual policy forum in Sintra, Portugal, U.S. Federal Reserve Chairman Jerome Powell expressed optimism about the forecast for the American economy, but still called "price stability" his highest concern.

Alongside fellow panelists ECB President Christine Lagarde; the general manager of the Bank of International Settlements, Agustín Carstens; and Bank of England Governor Andrew Bailey, Powell told moderator Francine Lacqua of Bloomberg Television, “We hope that growth will remain positive” and that “overall the U.S. economy is well positioned to withstand tighter monetary policy.”

As Lacqua remarked, American interest rates had remained historically low for close to two decades until earlier this month when the Federal Reserve elected to raise interest rates three-quarters of a point, the highest single rate hike since 1994. Officials also signaled that they may consider another half-point raise when they reconvene in July. The aim of these rate hikes is to reduce inflation from its current level of 8.6% to about 2%.

Doing so, Powell said, would help "slow growth down so that supply will have a chance to catch up."

“Is there a risk that we would go too far [with rate hikes]? Certainly there’s a risk,” Powell admitted. “But I wouldn’t agree that that is the biggest risk to the economy. The bigger mistake to make would be to fail to restore price stability.”

Powell and others on the panel insisted that economic changes stemming from the pandemic have permanently altered banking paradigms.

“The economy is being driven by very different forces. What we don’t know is whether we’ll be going back to something that looks like, or a little bit like, what we had before,” Powell said.

Lagarde agreed: "I don’t think we’re going back to that [pre-COVID] period of low inflation."

The group also cited the war in Ukraine as another roadblock with unpredictable economic consequences. Powell claimed that, thus far, the war has "added tremendously" to the upheaval in inflation and food prices.

Still Powell maintained optimism regarding the current state of the U.S. economy.

"The U.S. economy is in pretty strong shape," he averred.

Though careful to note that those in lower income brackets were not necessarily doing well, Powell claimed that "households are in very strong financial shape" because of increased savings from 2020 and that businesses are showing "very low rates of default."

Despite Powell's enthusiasm, others are much more skeptical about the economic future. According to Yahoo! Financial, "About a third of economists predict a US recession as likely in the next two years, 21% seeing some time with zero or negative growth likely and the rest looking for the Fed to achieve a soft landing of continuing growth and low inflation, according to a survey earlier this month."

Americans have expressed similar doubts about the state of the U.S. economy, and many polls indicate that voters will hold Democrats responsible for high gas and food prices in the midterm elections this November.

Most recent
All Articles