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Mohamed Mohamoud

Author and the owner of idman news

June 29, 2022

Idman news

Wararka Jaraaidyada Soomaalida ay qoreen

Powell says he doesn’t think a recession is inevitable


Federal Reserve Chairman Jerome Powell said Thursday that he didn’t think a U.S. recession was inevitable.

“I don’t think that a recession is inevitable,” Powell said, during his second day of testimony to Congress on interest-rate policy.

“We can’t fail on this. We really have to get inflation down to 2%,” he added.

The Fed’s favorite inflation gauge, the personal consumption expenditure index,  ran at a 6.3% annual rate in April.

The Fed raised its benchmark interest rate by 75 basis points last week, the biggest move in almost 30 years, to a range of 1.5%-1.75%. At his press conference last week, Powell said either a 50 bp move or a 75 bp move seems likely at the next meeting on July 26-27.

Powell told lawmakers Thursday that the Fed has penciled in further rate hikes to a range of 3%-3.5% by the end of the year and then maybe 3.5%-4% in 2023.

Other Fed officials have spoken this week supporting a 75bp rate hike in July. The latest official was Fed Governor Michelle Bowman earlier Thursday.

Many economists think the Fed’s current policy path is reducing the odds of a soft landing for the economy and raising the probability of a recession.

The yield on the 10-year Treasury note
TMUBMUSD10Y,
3.042%

fell sharply for the second straight day on fears of a recession.

Fresh economic data on the U.S. manufacturing and services sectors added to worries about a recession.

Powell said Thursday the U.S. economy was very strong and stressed he has an “unconditional” commitment to fight inflation.

Asked about his level of commitment, Powell replied: “It’s unconditional…we have a labor market that’s sort of unsustainably hot and we are very far from our inflation target. We really need to restore price stability, get inflation back down to 2%.”

On Wednesday, Krishna Guha, a former Fed staffer now vice-chairman of Evercore ISI, noted that Powell did not use the word “unconditional” in his testimony to the Senate. Guha said this was a key factor in his view that Powell was “less hawkish than expected.”

Guha said that “unconditional” implies a readiness to accept higher unemployment, and a recession, in order to get inflation down.

Members of Congress expressed concern about a potential recession.

Rep. James Himes, a Democrat from Connecticut, said that in the wake of the Jan. 6 riot at the Capitol, he didn’t think “our democracy can sustain either runaway inflation or another recession. “

U.S. stocks
DJIA,
-0.33%

SPX,
-0.10%

turned lower as Powell’s testimony lasted into the early afternoon.



Market

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Lasoco xaaladda EAST AFRICAN COUNTRIES ugu danbaysay ee Xanuunka CORONAVIRUS .