Inflation has proved higher and far more persistent than he or the Fed's staff economists had foreseen.
, Powell is facing questions — and criticism — surrounding his stewardship of the Fed at a time when its challenges are multiplying.
Yet Powell's explanation was faulted by many Fed watchers, with some complaining that he had failed to articulate a coherent and consistent policy. “When the Fed changes their mind at the last minute like this," Dudley said,"it does have the potential to undermine the credibility” of its critically important communications with markets and the public.As those criticisms echo, Powell will visit Capitol Hill this week to give his semi-annual testimony to House and Senate committees, where he could face tougher questions than at any other point in his tenure as Fed chair.
A related concern is that Powell has said the Fed will keep raising rates until there is “clear and compelling” evidence that inflation is declining toward its 2% annual target. But rate hikes typically take months to slow the economy. The Fed could end up raising rates more than is needed before it recognizes that inflation is falling, thereby elevating the likelihood of a recession.“A hard landing is probably pretty likely,” Dudley said. “The risk of a hard landing has gone up.
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