US Federal Reserve (Fed) Chairman Jerome Powell stated that the US economy is strong and that the bank can protect the economy from entering a recession.
The European Central Bank (ECB) organized the “Central Banking Forum” in Sintra, Portugal. Fed Chairman Powell, ECB President Christine Lagarde and Bank of England Governor Andrew Bailey participated in the panel titled “Challenges for monetary policy in a rapidly changing world”.
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Stating that the US economy is in a strong state, Powell said that the Fed could reduce inflation to 2 percent.
“We will not allow the transition from a low inflation environment to a high inflation environment,” Powell said, emphasizing that rapid price increases will not become entrenched.
Stating that they aim to increase interest rates without allowing the economy to enter recession, Powell said, “This is our goal. I believe there are ways we can achieve this.”
Powell said, “Households are strong in total. The same is true for businesses. The labor market is incredibly strong. The economy is able to withstand monetary policy actions.”
Speaking at the panel, Lagarde stated that the likelihood of a return to the very low inflation period before the pandemic is very small, and that central banks need to adapt to remarkably high inflation rates.
Bank of England Governor Andrew Bailey said, “Our goal is to return to low inflation. We are currently facing a very large real income shock. If we see a higher persistence in inflation, we may need to act more aggressively.”
