Recession Warning: Fed Chair Jerome Powell Admits That Higher Rates Might Trigger a Downturn

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Assessment: We have often wondered when the bill for out of control government  spending combined with an accommodating Federal Reserve would have to be paid …

Federal Reserve Chairman Jerome Powell conceded on Wednesday that the Federal Reserve’s battle to bring down inflation could trigger a recession.

“It’s certainly a possibility,” Mr. Powell said Wednesday during the first of two days of congressional hearings. “We are not trying to provoke and do not think we will need to provoke a recession, but we do think it’s absolutely essential” to tame inflation.

“When He opened the third seal, I heard the third living creature say, “Come and see.” So I looked, and behold, a black horse, and he who sat on it had a pair of scales in his hand” Rev. 6:5

WASHINGTON, DC - MARCH 03: U.S. Federal Reserve Chair Jerome Powell testifies before a Senate Banking, Housing, and Urban Affairs Committee hearing on the Fed's "Semiannual Monetary Policy Report to the Congress," on Capitol Hill on March 3, 2022 in Washington, DC. (Photo by Jonathan Ernst-Pool/Getty Images)

Inflation has been running at the highest rate in 40 years and has proven to be more widespread and more persistent than Fed officials initially thought. Past episodes in which the Fed tightened monetary policy to tame inflation have typically resulted in a recession. Hopes that the outcome could be different thins time—that the Fed might achieve a so-called “soft landing”—have been fading among experts.

In an op-ed for Bloomberg, former New York Fed chief Bill Dudley wrote that a recession is “inevitable.’

“If you’re still holding out hope that the Federal Reserve will be able to engineer a soft landing in the US economy, abandon it,” Dudley wrote. “A recession is inevitable within the next 12 to 18 months.”

Bank of America analysts say there is a 40 percent chance of a recession next year. They say that it is more likely than not that there will be a recession sometime over the next two-and-a-half years.

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