January 1, Federal Reserve Says Recession is a “Possibility”

Federal Reserve chair Jerome Powell says it’s “certainly a possibility” that the central bank’s interest rate hikes to battle inflation could lead to a recession in the U.S.

“It is not our intended outcome at all,” Powell told lawmakers Wednesday as a two-day congressional hearing began.

“It’s certainly a possibility,” Powell said. “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.”

The Fed faced bipartisan skepticism that its policies could mitigate consumer price inflation.

“Though I’m pleased you have begun taking drastic action necessary to right the U.S. economy, these actions are long overdue, and monetary policy remains too loose,” Sen. Thom Tillis (R-N.C.) said.

“Inflation is like an illness, and medicine needs to be tailored to the specific problem. Otherwise, you could make things a lot worse. Right now, the Fed has no control over the main drivers of rising prices,” Sen. Elizabeth Warren (D-MA) said.