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Powell Warns of "Likely" Growth Slowdown From Aggressive Rate Hikes

Economy Jun 29, 2022 22:10
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© Reuters.

By Scott Kanowsky 

Investing.com -- Federal Reserve chair Jerome Powell has warned that a broader economic slowdown could be a "likely" outcome from aggressive monetary policy actions aimed at curbing the soaring prices.

Speaking at a closely watched panel of some of the world's top central bankers, Powell backed the Fed's recent 75 basis point interest rate rise - the largest hike since 1994 - as necessary to help bring inflation back down to its 2% target. He also admitted that the Fed is trying to engineer a controlled downturn in growth to help the U.S. economy deal with recent supply chain disruptions that have partly contributed to rising costs.

"We had expected that this year that growth would moderate to a more sustainable path. We also are, of course, raising interest rates and the aim of that is to slow growth down so that supply will have a chance to catch up," Powell said.

He added that he hopes the economy's output remains positive while supplies recover. But Powell conceded that there's "no guarantee" the Fed can achieve these goals, particularly given the impact of the war in Ukraine on global prices.

Powell's comments come as investors weigh whether a slew of weak recent data around the world - including the gloomiest reading of U.S. consumer confidence in the economic outlook in almost a decade - may lead policymakers to rethink plans to roll out large rate hikes.

Powell Warns of "Likely" Growth Slowdown From Aggressive Rate Hikes
 

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