Federal Reserve Chairman Jerome Powell admitted on Wednesday how little he understands soaring inflation.
“I think we now understand better how little we understand about inflation,” Powell stated at the European Central Bank forum on central banking in Sintra, Portugal. “This was unpredicted,” the expert admitted.
Powell is in charge of reducing President Biden’s 40-year-high inflation by a difficult process of increasing interest rates. By law, the Federal Reserve is charged with a dual mandate of pursuing maximum employment and stable prices.
“We believe we can do that. That is our aim,” he said. “It’s gotten harder… the pathways have gotten narrower.”
“The process is highly likely to involve some pain but the worst pain would be from failing to address this high inflation and allowing it to become persistent,” he continued.
Federal Reserve Chair Jerome Powell: "I think we now understand better how little we understand about inflation."
— The Recount (@therecount) June 29, 2022
“Is there a risk that we would go too far?” he asked. “Certainly there’s a risk, but I wouldn’t agree that it’s the biggest risk to the economy. The bigger mistake to make, let’s put it that way, would be to fail to restore price stability.”
Breitbart News reported Wednesday the U.S. economy shrank at a 1.6 percent annual pace, while inflation hurt consumer spending:
This is the government’s third and final estimate of the path the economy took in the first three months of the year. The government’s first estimate had the economy shrinking 1.4 percent and the second estimate was a contraction of 1.5 percent. This was the first time the economy registered a negative rate of growth since early in 2020 when the pandemic and lockdowns took hold.
Consumer spending—the chief engine of U.S. economic growth—was much weaker than previously thought, suggesting that inflation was already weighing down the economy and raising the risks of a recession. Consumer spending was revised down from an estimated 3.1 increase to smaller increase of 1.8 percent.
Data showed consumers cut spending on goods such as food, clothing, and home furniture after adjusting for inflation.
Inflation has been fueled by Biden’s massive spending packages, war on American oil, and supply chain woes.