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Jay Powell said: ‘The question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control.’ © Win McNamee/Getty

Bringing inflation back down to the Federal Reserve’s 2 per cent target will cause “some pain”, chair Jay Powell warned.

The message from the head of the US central bank comes amid significant uncertainty about the economic outlook as the Fed begins what is likely to be the fastest tightening of monetary policy in recent years.

The central bank has already raised rates by 0.75 percentage points from the near-zero levels that had been in place since the early days of the coronavirus pandemic, having implemented a half-point rate rise just last week. It will also begin shrinking its $9tn balance sheet next month.

At least two more half-point rate rises are expected in June and July, and the Fed is anticipated to maintain that pace at its meeting in September. By the end of the year, traders estimate the benchmark policy rate will rise to around 2.7 per cent.

In an interview with MarketPlace on Thursday, Powell reiterated the Fed’s commitment to bringing down inflation and underscored how challenging it will be to do so without job losses and a recession.

“The question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control,” Powell added. “But we should control the controllable . . . there’s a job to do on demand.”

Powell also sought to clarify the Fed’s willingness to raise rates by 0.75 percentage points at some point, having last week during a press conference said the central bank is “not actively considering” that.

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

Powell’s comments were published just hours after the US Senate voted overwhelmingly in favour to confirm him for a second term as chair.

Read more on Powell’s outlook here.



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