Powell Aims for Soft Landing That Eluded Seasoned Fed Chiefs
Federal Reserve Chairman Jerome Powell is trying to pull off an unparalleled soft landing of a U.S. economy. At the same time, he wants to maintain a rock-bottom unemployment rate.
Powell delivered his second round of semi-annual testimony to Congress on Thursday. He told lawmakers that the next two years will be “good” ones for the economy. If he’s right, he’ll be at the controls when the current U.S. expansion becomes the longest on record.
It’s what comes afterward that has some investors worried. The concern that Powell could end up crashing the U.S. into a recession as it jacks up interest rates. They believe that higher interest rates are necessary to prevent the labor market and the economy from overheating.
“If we were to roll the camera forward to two years from now, the Fed “will have a problem getting it right.”
It’s tough because the central bank is trying to slow economic growth enough to edge up unemployment. At the same time, they do not want to trigger a contraction in gross domestic product. “It’s going to take some real good policy making and some luck to avoid a recession in 2020.” This would coincide with the next presidential election.