Fed Deliberately Throttling US Economic Growth, Jerome Powell Tells Pranksters
16:05 GMT 27.04.2023 (Updated: 06:51 GMT 28.04.2023)
© AP Photo / Mark Lennihan
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The Federal Reserve has embarked on a series of interest rate hikes designed to cool inflation. These efforts have met with mixed success, nearly sparking a massive banking collapse last month. Does Fed officials’ public rhetoric match their private sentiments? A pair of Russian pranksters decided to find out.
The United States stands on the brink of a recession, and a number of shocks either domestically or internationally will push the economy over the edge, Federal Reserve Chairman Jerome Powell has revealed.
Speaking to legendary Russian pranksters Vladimir ‘Vovan’ Kuznetsov and Alexei ‘Lexus’ Stolyarov, Powell also confirmed the Fed’s role in deliberately holding back economic growth and taking other “painful” measures to try to get a grip on inflation.
“What we’re going to find in 2022 was that growth was positive but modest. It was subdued, so you know, one percent, that level. In terms of this year, most forecasts call for the US economy to grow, but at a pretty subdued level – so growth of less than one percent, let’s say,” the Fed chairman said, speaking to who he thought was Ukrainian President Volodymyr Zelensky in a video call.
“But we would tell you that a recession is almost as likely as very slow growth. That’s a fact, and I think that is partly because of us having rates quite a bit. But this is what it takes to get inflation down. To get inflation off of – we had inflation at its highest level in forty years – to get inflation to come down we need a period of slower growth so the economy can cool off, so that the labor market can cool off, so that wages can cool off. That’s how inflation comes down. That’s the only way we know to bring inflation down. And it can be painful but we don’t know of any painless way for inflation to come down,” Powell said.
25 April 2023, 22:55 GMT
Global Risks
According to the Fed chairman, the future of the economy depends on a number of factors, some of which can be foreseen, others not.
“When growth is very slow already, any kind of a shock, any kind of a negative event, whether it be problems with a new Covid strain, or some kind of a terrible event in Ukraine, a turn that we don’t want to see in Ukraine, something like that, some kind of a negative shock – that could put the US economy in recession,” Powell said.
“You ask for risks, the risks are clearly what happens in Ukraine is really going to matter, and clearly what happens in China will matter. In the United States I think we have a risk from this thing you’re reading about – the debt ceiling, you know there’s going to be a big confrontation in the next few months,” the official added, referring to the battle in Congress on legislation to raise the amount of debt the US can legally rack up.
26 April 2023, 22:04 GMT
Labor Market Weakening, US Facing Labor Shortages
Powell also confirmed that the US labor market is “weakening,” and that wage growth is falling, but said that’s actually a “good thing.”
“There are some modest signs that the labor market is weakening, for example the number of hours worked per week ticked down a very small amount. That is a sign of a slight softening in labor market conditions. That is true. In addition, wages which have been very, very high…the increases have been declining a little bit, and that’s a good thing, because too high wage inflation causes price inflation. Our mandate is for price inflation, not wage inflation,” the Fed chairman said.
Powell blamed older Americans for dropping out of the labor market and retiring, supposedly because “they don’t want to take any risk on Covid.” They and others who have dropped out have led to a labor shortage, which “makes it hard to get inflation down.”
The state of the economy became a hot topic of debate last year, when the US entered two consecutive quarters of negative growth – which strictly speaking is the definition of a recession. Biden administration officials profusely refused to admit that the US had entered a recession, with the US finishing off last year with growth of 1.1 percent, according to official data. On Thursday, the Department of Commerce reported that growth remained steady during the first three months of 2023, hitting 1.1 percent during the quarter.
The Federal Reserve has faced flak from detractors for slowing growth and nearly causing a repeat of the 2007/2008 banking crisis last month by raising interest rates, which reduced the value of Treasury bonds and forced several major commercial banks into bankruptcy.
25 April 2023, 21:56 GMT
'Surprising' Interview
Asked to comment on the interview with Powell, Alexey "Lexus" Stolyarov told Sputnik that he found it “surprising” that the Fed chairman was so “optimistic” about the current state of the economy, notwithstanding his comments about the US being on the brink of recession, including “if there is some kind of unexpected event in Ukraine.”
“I think this is just a very self-confident bureaucrat, and that he understands that whatever happens to the economy, it will not affect him personally. And, first and foremost, he understands perfectly that this will affect Ukraine and Europe. The United States, even if they suffer, are unlikely to face any serious consequences,” the prankster said.
Stolyarov said he found Powell more competent compared to European Central Bank president Christine Lagarde, whom Vovan and Lexus pranked last month. “He successfully hid negative prognoses, did everything possible to calm ‘Zelensky’, saying that a negative result is unlikely, but possible.”
27 April 2023, 16:02 GMT
