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Federal Book Chair Jerome Powell alerted of economic crisis if rising cost of living gets worse and the central bank is required to tighten monetary policy way too much.
" If inflation does end up being also consistent, that will result in much tighter monetary policy, and that could cause an economic downturn," Powell claimed during his election testament prior to the U.S. Senate Board on Financial, Housing and also Urban Affairs.
Powell seemed positive when speaking about the U.S. economy as well as work while promising to get inflation controlled.
" This year, we see an economy where the labor market is recouping rapidly, and inflation is well above 2%. This tells us is that the economy no longer requires or desires the very accommodative policies we had in area to manage the pandemic. Yet it is a long way to regular," he stated.
The Fed sees rising cost of living stress on track to last right into the center of this year. However, if inflation is much more relentless, Powell claimed the reserve bank is prepared to raise rates much more in time.
Powell also exposed his take on plan normalization, stating: "We are going to end possession acquisitions in March. We will certainly raise prices. And at some point this year, we will let the annual report drainage. We'll have the ability to move quicker and also a little quicker this moment around."
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Fed's Powell warns of recession if central bank forced to tighten too much
Federal Reserve Chair Jerome Powell warned of recession if inflation gets worse and the central bank is forced to tighten monetary policy too much.
"If inflation does become too persistent, that will lead to much tighter monetary policy, and that could lead to a recession," Powell said during his nomination testimony before the U.S. Senate Committee on Banking, Housing and Urban Affairs.
Powell sounded upbeat when talking about the U.S. economy and employment while promising to get inflation under control.
"This year, we see an economy where the labor market is recovering rapidly, and inflation is well above 2%. This tells us is that the economy no longer needs or wants the highly accommodative policies we had in place to deal with the pandemic. But it is a long way to normal," he said.
The Fed sees inflation pressures on track to last into the middle of this year. However, if inflation is more persistent, Powell said the central bank is prepared to raise rates more over time.
Powell also revealed his take on policy normalization, stating: "We are going to end asset purchases in March. We will raise rates. And at some point this year, we will let the balance sheet runoff. We'll have the ability to move sooner and a little faster this time around."
__________________________________________________________________
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