The head of the U.S. Federal Reserve System, Jerome Powell, said that the country’s economy is strong and well prepared to cope with a more tight monetary policy.
It will not be easy for the U.S. government to achieve a “soft landing” of the national economy in the current geopolitical conditions, keeping it from slipping into recession and ensuring a reduction in the inflation rate in the country while preventing an increase in unemployment. This was acknowledged on Monday by the head of the U.S. Federal Reserve System (Fed, Central Bank) Jerome Powell.
“I hasten to add: no one expects that ensuring a “soft landing” will be easy in the current context. In the current context, very little is uncomplicated. And monetary policy is often called a blunt instrument that cannot provide surgical precision. My colleagues [at the Fed] and I will do everything possible to succeed in solving this difficult task. It is worth noting that today the [U.S.] economy is very strong and well prepared to cope with a more tight monetary policy,” Powell said at a conference of one of the associations of American business in Washington.
In his speech, he also asked the question of “how likely it is that monetary policy can lead to lower inflation without provoking a recession” in the United States. “Our goal is to restore price stability, helping to ensure another long period of expansion (that is, the growth of the American economy) and a strong labor market,” the head of the Fed assured.
“According to some, history shows that the odds are not in favor of providing a “soft landing”, pointing to 1994 as the only successful “soft landing” in the post-war period,” Powell said. However, he believes that history “gives some grounds for optimism.” The Fed significantly raised interest rates in 1965, 1984 and 1994 in response to the alleged “overheating” of the American economy “without provoking a recession,” Powell said. “In other cases, recessions chronologically followed the completion of the compression cycle,” he believes. “Nevertheless, recessions did not arise clearly due to excessive tightening of monetary policy.”
In addition, Powell reiterated that the situation in Ukraine, as well as the sanctions applied by the West against Russia, is likely to strike both the U.S. economy and the global economy as a whole. According to him, these events “are likely to limit economic activity abroad and lead to further disruption of the functioning of supply chains, which will result in the “transfusion” of negative consequences into the American economy.”
According to him, the “strength and sustainability” of the impact of the situation around Ukraine on the world economy “remain highly uncertain and depend on events that have not yet occurred.”