Powell Sees More “Pain” Ahead, Admits ‘Soft Landing’ Is ‘Out Of Fed’s Control’

Some of the important parts of Powell recent interview:

Powell: So you can see that inflation is just way too high here in the United States. And by the way, the same all over the world, really, the global economies all around the world have been hit by a series of inflationary shocks and, pretty much, I just came back from a set of meetings with central bankers from around the world, and we’re all facing the same kind of issues and the public are facing the same kinds of issues.

Ryssdal: Worse here, though, worse here, to be clear, right?

Powell: Some places worse, some places better. We’re facing different challenges, but then again our economy’s more fully recovered, they may be just behind us in time. But what would I say to that person? So I would say that we fully understand and appreciate how painful inflation is, and that we have the tools and the resolve to get it down to 2%, and that we’re going to do that. I will also say that the process of getting inflation down to 2% will also include some pain, but ultimately the most painful thing would be if we were to fail to deal with it and inflation were to get entrenched in the economy at high levels, and we know what that’s like. And that’s just people losing the value of their paycheck to high inflation and, ultimately, we’d have to go through a much deeper downturn. And so we really need to avoid that.

“If things come in better than we expect, then we’re prepared to do less,” Mr. Powell said.

“If they come in worse than when we expect, then we’re prepared to do more.”

Then he poured cold water on the idea of a 'soft landing' that so many asset-gatherers and commission-rakers are constant telling investors is likely:

“There are huge events, geopolitical events going on around the world, that are going to play a very important role in the economy in the next year or so,” Mr. Powell said on Thursday.

“So the question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control.”

Furthermore Powell comes clean on his “transitory” inflation epic-fail:

I have said, and I will say again that, you know, if you had perfect hindsight you’d go back and it probably would have been better for us to have raised rates a little sooner. I’m not sure how much difference it would have made, but we have to make decisions in real time, based on what we know then, and we did the best we could. Now, we see the picture clearly and we’re determined to use our tools to get us back to price stability.