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The Federal Reserve Chairman acknowledges the possibility of a recession

US Federal Reserve Chairman Jerome Powell acknowledged to Congress that a rapid rise in interest rates could cause a recession, even if that is not what he wants.

During a Senate hearing, Powell answered a question from a senator who had expressed concern about a recession because of the bank’s monetary policy, saying, “It’s certainly a possibility…that’s not the desired effect at all, but it’s certainly a possibility”.

Powell also acknowledged that the intensity of inflation “clearly surprised” the monetary authorities and warned of the possibility of “more surprises.”

In his speech to Congress, Powell stressed that the US economy “is strong enough and in a good position to face the tightening of monetary policy.” He added, “Inflation surprised us gradually over the past year, and we may expect more surprises, while the price hike reached its highest level in 40 years in the United States, recording 8.6% yearly.”

He recalled that the US Federal Reserve raised key interest rates in the past three meetings, which led to a 1.5 percentage point increase in the cost of credit.

It is expected that “interest rates will continue to rise”, provided that “the pace of the rise depends on economic data.”

Powell indicated that the US Federal Reserve will take its “decisions meeting after meeting,” stressing that the US central bank’s communication mechanism will be “as clear as possible.”

We will strive to avoid adding uncertainty to an already hard and unstable period,“he promised.”

However, he pointed out that the problem “has been exacerbated in recent months by the war, the high prices of raw materials and other problems supply chains faced”.

“There is a mismatch between supply and demand, with more job offers than candidates,” he said.

He reminded us that the Federal had raised key interest rates during the past three meetings, which would affect the cost of all loans, from housing loans to consumer loans and corporate loans.

In addition to that, he warned that the committee charged with setting monetary policy for the US Central Bank expects to continue raising interest rates and that its pace “will depend on economic data.”

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About AISU

Arab Iron and Steel Union ( AISU ) was established in Algeria in 1971 as the first Arab union of Arab countries to be established under the umbrella of the Council of Economic Unity in the League of Arab States.

AISU is a non-governmental organization of a private nature, not of a political or commercial nature.

AISU works in the field of preparing studies, organizing courses and holding periodic conferences for the prosperity of the Arab iron and steel industry. The union includes a wide range of companies with multiple activities related to the iron and steel industry.

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