WASHINGTON – Federal Reserve Chair Jerome Powell, fresh off winning Senate confirmation for a second term earlier in the day, acknowledged for the first time Thursday that high inflation and economic weakness overseas could thwart his efforts to avoid causing a recession.
For weeks, Powell has portrayed the Fed’s drive to raise interest rates as consistent with a so-called “soft landing” for the economy. Under that scenario, the Fed would manage to tighten borrowing costs enough to cool the economy and curb inflation without going so far as to tip the economy into recession.
But in an interview on NPR’s “Marketplace,” Powell conceded that that balancing act — which many economists have said they doubt the Fed can achieve — could be undercut by economic slowdowns in Europe and China.
“The question whether we can execute a soft landing or not — it may actually depend on factors that we don’t control,” the Fed chair said. “There are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so.”
Such comments reflect less confidence in avoiding a recession than Powell has previously conveyed. Just last week, he said at a news conference: “I think we have a good chance to have a soft or softish landing or outcome.”
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