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Federal Reserve chair warns taming 'challenging' inflation could come with steep unemployment

Federal Reserve Powell Funding
Posted at 5:04 PM, Sep 21, 2022

As the Federal Reserve continues to raise interest rates making borrowing more expensive for things like mortgages and business loans, Fed Chair Jerome Powell warns that taming inflation in this way could lead to steep unemployment.

The Federal Reserve raised the policy rate on Wednesday .75 points to 3.25%, with policymakers predicting that rates will be pushed up on borrowing costs to 4.4 percent by the end of this year. The supersize rate move is predicted to also come with another half-point adjustment, the New York Times reported.

As economists continue to forecast what is known as a "hard landing," they're seeing the high possibility of that coming with a jump in unemployment rates around the country.

"We have always understood that restoring price stability while achieving a relatively modest...increase in unemployment would be very challenging," Powell said.

"No one knows whether this process will lead to a recession, or if so, how significant that recession would be," he said.

The Federal Reserve has been dramatically ramping up its efforts to combat the fastest inflation rates in 40 years. Wednesday's "supersize" rate increase was its third straight hike to tame red-hot inflation increases.

The policy forecast revealed by officials on Wednesday was way more severe than a previous forecast official had predicted, signaling the deep uncertainty ahead.