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Recession in US Possible as Fed Thinks Inflation Target Will Hit by 2025 - Powell

© AP Photo / Seth WenigFILE - A screen displays market data at the New York Stock Exchange in New York, Wednesday, Aug. 10, 2022. Wall Street’s big gains this summer have been spread widely across industries. The profit growth underpinning those gains? Not so much. (AP Photo/Seth Wenig, File)
FILE - A screen displays market data at the New York Stock Exchange in New York, Wednesday, Aug. 10, 2022. Wall Street’s big gains this summer have been spread widely across industries. The profit growth underpinning those gains? Not so much. (AP Photo/Seth Wenig, File) - Sputnik International, 1920, 28.06.2023
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WASHINGTON (Sputnik) - A recession in the United States is not certain but still possible as the Federal Reserve’s target of returning inflation to 2% per year via interest rate hikes might not be achieved until 2025, Chairman Jerome Powell said on Wednesday.
“A recession, to me, is not the most likely case but it's certainly possible,” Powell said at a panel discussion hosted by the European Central Bank. “I don't see us getting to 2% this year or next year, I see us getting there the year after... 2025.”
In the interim, the United States was mostly likely due for an extended period of monetary tightening, although it could also slow its pace of rate hikes whenever appropriate, Powell said.
“There is a strong majority for two more rate hikes in the dot plot,” he said, referring to an internal measure used by the Fed to determine the appropriate monetary tightening and easing. “I wouldn't take moving at consecutive meetings off the table. We will be restrictive as long as we need to be.”
The Fed’s next decision on interest rates will be on July 26. Many economists predict the central bank will add another quarter percentage point to rates, bringing them to a peak of 5.5%, as it tries to tame inflation.
The Consumer Price Index, the broadest gauge for US inflation, grew by 4% in the year to May, expanding at its slowest pace in more than two years. The Personal Consumption Expenditures Index, the Fed’s preferred inflation gauge, meanwhile, grew by 4.4% in the year to April. Both are, however, at least twice above the Fed’s 2% target for annual inflation.
The Treasury Building is viewed in Washington, May 4, 2021.  - Sputnik International, 1920, 22.06.2023
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The central bank has raised interest rates by 5% since the end of the coronavirus outbreak in March 2022.
The Fed has a mandate of ensuring “maximum employment” through a jobless rate of 4% or below, and keeping inflation manageable. The pandemic measures and the trillions of dollars of relief and other spending by the government have triggered runaway inflation since mid-2021.
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