Chairman Jerome Powell said on Wednesday that there was no guarantee that the central bank will make a soft landing for the U.S. economy.
We think there are pathways for us to get back to 2% inflation while still retaining a strong labor market. Powell said that they believe we can do that during a panel discussion with other top heads of central banks at the European Central Bank policy conference in Sintra, Portugal.
Powell said that there is no guarantee that we can do that. He said it was going to be quite challenging and only made more difficult by the events of the last few months, such as the war in Ukraine. Powell was optimistic about the current health of the economy despite the contraction of economic growth in the first three months of the year. He said that the labor market is tremendously strong and the households and businesses are in very strong shape. He said that the Fed is engineering slower growth – growth moderate, which is a necessary adjustment to let supply catch up with strong demand. There is a risk, he said. I wouldn't agree that it's the biggest risk to the economy. He said that the biggest mistake would be to fail to restore price stability. Powell said that the Fed will not allow a transition from a low inflation environment to a high inflation environment. He said the Fed needs to get its benchmark policy rate into restrictive territory fairly quickly. The DJIA, SPX stock opened lower on Wednesday. The yield on the 10 year Treasury note TMUBMUSD 10 Y fell to 3.17%.