Powell Says Soft Landing Will Be “Challenging,” Key Takeaways from Fed Financial Stability Report

Markets were down for the eighth consecutive week as they continued to process a plethora of risks. One of the primary risks that investors are focusing on is the Federal Reserve’s resolve in tackling inflation. Earlier this week Chairman Powell gave some more clarity. While he acknowledged it was the goal of the FOMC to achieve a “soft landing,” he said it would be “challenging” to achieve such an outcome. The official definition of a “soft landing” would be for the Fed to bring down inflation from its multi-decade highs to its target of 2% without causing a recession in the United States.

Specifically, the Chairman mentioned that the already arduous task of achieving a soft landing for the US economy is even more difficult because of developments like the Russia/Ukraine War and associated commodity disruptions. The committee has achieved some of its desired effects of tightening, and rate-sensitive areas of the economy like the mortgage market have started to cool. However, given other risks, if spending cools more quickly than anticipated and the strength of consumer balance sheets are sapped by inflationary pressures, then things could reverse quickly.

Economists at Deutsche Bank, Bank of America, and others on the Street, have cast major doubts about the...

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