Federal Reserve Chairman Jay Powell started out soft and ended up sounding the alarm. In his appearance before the US Senate Banking Committee, Powell first said that the US economy does not have to be headed for a recession even if the ‘Fed’ continues to raise rates until the inflation target is reached (average not by the CPI , but by the underlying rate of consumer spending) reaches 2%. He also added that the central bank will not hesitate to tighten the price of money until that level is reached, and that what is really dangerous is letting prices continue to rise, even if the rise is confined to energy and fresh foods, which are the most volatile components of the index.

Then came the sales. During question time, Powell acknowledged that a “soft landing” – that is, a slowdown in inflation without causing a recession – “is a big challenge.” It was a contradictory message to the one he had launched at the beginning, and the bag immediately accused him. The modest gains with which the major Wall Street indices had welcomed the start of Powell’s intervention immediately evaporated in the face of the unmistakably worrying tone of the Federal Reserve chairman’s words.

The market sees a recession more likely every day. That’s Goldman Sachs’ central scenario, while Citibank and Deutsche Bank see a 50% risk. William Dudley, former president of the Federal Reserve Bank of New York, has told the Bloomberg news agency that a recession in 2023 is “inevitable”. The ‘Fed’, thus, is facing its biggest failure since fifteen years ago it was unable to foresee the destructive effect of the ‘puncture’ of the US real estate bubble that caused the collapse of the financial system in that country and a world recession .

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