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Chair Powell Asked On Whether There Is No Soft Landing

Q: SEP shows unemp rising to 4.4%, is that no soft landing? Is that necessary to get inflation down?
  • A: The SEP has what I would characterize as a relatively modest increase in the unemployment rate. We see the current situation as outside of historical experience in a number of ways. Job openings are incredibly high vs the number of job seekers. It's plausible that openings could come down. They need to without as much of an increase in unemp as has happened in earlier historical episodes.
  • Also expectations have been well-anchored. There's no basis for complacency there, but that should make it easier to restore price stability.
  • Part of the inflation is caused by a series of supply shocks: pandemic, reopening, Russia-Ukraine, have all contributed.
  • If those things start to get better - and we do see some evidence of that - commodity prices look like they may have peaked, supply chain disruptions are beginning to resolve.
  • Restoring price stability while achieving a relatively modest increase in unemployment and a soft landing would be very challenging. And we don't know. No one knows whether this process will lead to a recession or if so, how significant that recession would be. That's going to depend on how quickly wage and price inflation pressures come down.
  • The chances of a soft landing are likely to diminish if policy needs to be more restrictive or for longer. We're committed to getting inflation down to 2% because a failure to restore price stability would mean far greater pain later on.

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