Powell: Fed 'not trying to induce a recession' with interest rate hikes

“We’re not trying to induce a recession now, let’s be clear about that,” Powell told reporters after the policy-setting Federal Open Market Committee raised short term rates by 0.75%.

Powell said the Fed’s goal is to depress the rapid pace of inflation closer to its 2% target, all while preserving a “strong” labor market. Forecasts released by the Fed showed confidence in the central bank’s ability to hit both marks, although economists say the task will be tough.

Projections from the Fed published Wednesday showed the median official expects interest rates will rise to 3.4% by year-end, well above the 2.5% level that many Fed officials have described as “restrictive” for economic activity.

“[G]oing faster and deeper into restrictive territory implies a greater risk of a hard landing,” ING Economics wrote Wednesday afternoon.

A “hard landing” outcome would be the opposite of forecasts from the Fed, and may look like a sharp spike in unemployment as the rapid pace of rate hikes halts economic activity.

“There’s a pathway here. It is not going to be easy,” Powell said Wednesday. He added that inflation remains the priority, noting that “clearly, people do not like inflation.”

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