Powell Between Soft Landing, Hard Landing

Fed Chief Jerome Powell lately curbed his long-lived optimism that policymakers can eventually carry out a soft landing for the US economy. But as signs of a recession accumulate, the Fed’s new objective has changed into avoiding a painful crash.

Powell signaled that the Fed will adopt monetary policy tightening for longer with a stronger pace. The US economy is even struggling to avoid currently hot inflation. “Restoring price stability will take some time and requires using our tools forcefully to bring demand and supply into better balance”, said Powell.

A stock market rally that followed a slower but solid gain in US employment in August gave way to losses in afternoon trading as Wall Street assessed one of the last major economic reports the Federal Reserve will see before it raises its benchmark interest rate at its upcoming September meeting.

US stocks gave up early gains on Friday. The Dow Jones Industrial Average DJIA lost 200 points, or 0.6%, after rising as much as 370 points at its session high. The Nasdaq Composite COMP slipped 1%, giving up early gains.

Inflation is coming down from its peak and GDP just declined in back-to-back quarters, rare outside of recession. Even so, the Fed’s steadying hand has done little to right historic labour shortages and tight housing supply, and those imbalances continue to fuel outsize wage and rent increases.