{"id":1534520,"date":"2022-07-01T09:21:52","date_gmt":"2022-07-01T13:21:52","guid":{"rendered":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/?p=1534520"},"modified":"2022-07-01T09:21:57","modified_gmt":"2022-07-01T13:21:57","slug":"feds-powell-says-economic-growth-will-likely-slow-as-de-globalization-pressures-build","status":"publish","type":"post","link":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/feds-powell-says-economic-growth-will-likely-slow-as-de-globalization-pressures-build\/","title":{"rendered":"Fed&#039;s Powell Says Economic Growth Will Likely Slow as De-Globalization Pressures Build"},"content":{"rendered":"<aside class=\"mashsb-container mashsb-main mashsb-stretched\"><div class=\"mashsb-box\"><div class=\"mashsb-count mash-medium\" style=\"&quot;\"><div class=\"counts mashsbcount\">24<\/div><span class=\"mashsb-sharetext\">SHARES<\/span><\/div><div class=\"mashsb-buttons\"><a class=\"mashicon-facebook mash-medium mash-nomargin mashsb-noshadow\" 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       <!-- Share buttons by mashshare.net - Version: 4.0.47--><p>Federal Reserve Chair Jerome Powell said he thinks it\u2019s rather \u201clikely\u201d that the forces of de-<a href=\"https:\/\/www.theepochtimes.com\/t-globalization\">globalization<\/a> will mount, leading to a more fractionalized new normal characterized by higher inflationary pressures, lower productivity, and slower economic growth.<\/p>\n<p>Powell made the remarks on June 29, during a panel discussion at the European Central Bank\u2019s annual policy forum in Sintra, Portugal.<\/p>\n<p>\u201cWe\u2019ve lived through a period of disinflationary forces around the world\u2014this is globalization, aging demographics, low productivity, technology enabling all of that,\u201d Powell said, describing it as a world where inflation was generally \u201cnot a problem\u201d in most advanced economies.<\/p>\n<p>\u201cSince the pandemic, we\u2019ve been living in a world where the economy is being driven by very different forces, we know that,\u201d he continued, noting that what remains unknown is whether things will go back to a prior disinflationary environment and, if so, to what extent.<\/p>\n<p>\u201cWe suspect that it will be kind of a blend,\u201d the Fed chief said.<\/p>\n<p>\u201cIn the meantime, we\u2019ve had a series of supply shocks, we\u2019ve had very high inflation across the world, certainly through all the advanced economies, and \u2026 we\u2019re learning to deal with it,\u201d he said, with his remarks coming as central banks around the world have, in general, been caught flat-footed by persistently high inflation and have rushed to tighten loose monetary settings to bring down soaring prices.<\/p>\n<h2>\u2018Certainly a Possible Outcome\u2019<\/h2>\n<p>Powell said the Fed\u2019s job of achieving price stability and maximum employment in this new normal with new forces at work has been a \u201cvery different exercise\u201d than the U.S. central bank has undertaken over the past 25 years while suggesting that slower economic growth would be an inevitable tradeoff in fighting inflation.<\/p>\n<p>\u201cIf what we see, for example, is a re-division of the world into competing geopolitical and economic camps, in a reversal of globalization, that certainly sounds like lower productivity and lower growth,\u201d he said.<\/p>\n<p>\u201cThat\u2019s certainly a possible outcome and I think probably, to some extent, a likely outcome,\u201d Powell said.<\/p>\n<p>Asked by the panel moderator to comment on whether the U.S. economy can withstand an \u201conslaught\u201d of interest rate hikes, Powell replied by saying that America\u2019s economy is in \u201cpretty strong shape,\u201d noting factors like high household savings and a tight labor market.<\/p>\n<p>He added that the aim of the Fed\u2019s rate-hiking cycle is to have economic growth \u201cmoderate,\u201d calling it a \u201cnecessary adjustment\u201d that aims to bring down demand in the U.S. economy and bring it more into alignment with supply.<\/p>\n<p>\u201cRight now, supply and demand are really out of balance in many parts of the U.S. economy, the labor market being a big example of that,\u201d he said, with the unemployment rate currently at 3.6 percent and around two job vacancies for every job-seeker.<\/p>\n<p>\u201cWe need to get them better in balance so inflation can come down,\u201d he added, suggesting the Fed is prepared to tolerate some labor market pain as the price of cooling inflation.<\/p>\n<h2>\u2018No Guarantee\u2019 of a Soft Landing<\/h2>\n<p>Powell said that he sees \u201cpathways\u201d for the Fed to achieve a so-called soft landing, where inflation drops but unemployment doesn\u2019t move up significantly, though he added that \u201cthere\u2019s no guarantee that we can do that.\u201d<\/p>\n<p>\u201cWe believe we can do that,\u201d Powell said, but \u201cit\u2019s obviously something that\u2019s going to be quite challenging.\u201d<\/p>\n<p>Powell\u2019s remarks come on the heels of recent statements made by other Fed officials indicating that the central bank believes its current aggressive monetary tightening cycle is necessary to quell inflation and will lead to a slowdown in economic growth\u2014but that a <a href=\"https:\/\/www.theepochtimes.com\/t-recession\">recession<\/a> is not inevitable.<\/p>\n<p>Cleveland Fed President Loretta Mester, a voting member of the interest rate-setting Federal Open Market Committee (FOMC), said in a Wednesday interview on CNBC that the Fed is \u201cjust at the beginning\u201d of its rate-hiking endeavor and that it carries the risk of a\u00a0recession.<\/p>\n<h2>\u2018Bumpy Ride\u2019<\/h2>\n<p>Regardless of the possibility of an economic contraction, Mester insisted that the Fed needs to keep hiking rates \u201cexpeditiously\u201d and that, in order to get a handle on inflation, she said the central bank might have to err on the side of tighter financial conditions.<\/p>\n<p>\u201cWe\u2019re on a path now to bring our interest rates up to a more normal level and then probably a little bit higher into restrictive territory,\u201d she told CNBC.<\/p>\n<p>What Mester described as a \u201cbumpy ride\u201d toward tighter financial conditions would likely drive up the unemployment rate from the current 3.6 percent to between 4 percent and 4.25 percent over the next two years, she predicted.<\/p>\n<p>New York Fed President John Williams said in a separate\u00a0<a href=\"https:\/\/www.cnbc.com\/2022\/06\/28\/new-york-fed-president-john-williams-says-a-us-recession-is-not-his-base-case.html\" target=\"_blank\" rel=\"noopener\">interview on CNBC<\/a>\u00a0that he, too, sees a recessionary risk, though that is not his \u201cbase case.\u201d<\/p>\n<p>Williams predicted the U.S. economy would slow its pace of growth for the entire year to between 1 percent and 1.5 percent, calling it a \u201cslowdown that we need to see in the economy to really reduce the inflationary pressures that we have and bring inflation down.\u201d<\/p>\n<p>The Fed hiked rates by 75 basis points at its last meeting, with Fed Funds <a href=\"https:\/\/www.cmegroup.com\/trading\/interest-rates\/countdown-to-fomc.html\">futures contracts<\/a> putting the odds of another 75 basis point hike at the next July policy meeting at 89.1 percent. That would bring the benchmark overnight deposit rate up to a target range of between 2.25 percent and 2.50 percent from the current 1.50 percent to 1.75 percent.<\/p>\n<p>Mester said that the Fed would likely have to keep hiking rates to a terminal rate of between 3 percent and 3.5 percent.<\/p>\n<h2>Fed Dovish Pivot?<\/h2>\n<p>Nick Reece,\u00a0VP of Macro Research and Investment Strategy at Merk Investments, told The Epoch Times in an emailed statement that market expectations for Fed rate hikes have shifted.<\/p>\n<p>\u201cThe expected Fed rate hiking cycle peak has shifted higher and sooner over the past month: from an expected peak in mid-2023 at about 3.25 percent to the end of 2022 at 3.75 percent,\u201d he said.<\/p>\n<p>Reece added, however, that history shows that Fed hiking cycles don\u2019t typically last as long or go as high as markets expect, and that, \u201cin fact, the Fed dovish pivot may have already started.\u201d<\/p>\n<p>He pointed to the fact that 2-year Treasury yields spiked to 3.45 percent several weeks ago and have since fallen back to around 3 percent.<\/p>\n<p>\u201cThe 2-year yield typically peaks at or before Fed rate hiking cycle peaks and above rate hiking cycle peaks,\u201d he said, with his remarks coming as market watchers try to predict when the Fed might pivot away from tighter policy and adjust portfolio allocations to profit from the phase shift.<\/p>\n<div class=\"author_wrapper\">\n<div class=\"one_author_block round\">\n<div class=\"top_row\">\n\t\t\t\t\t<a href=\"https:\/\/www.theepochtimes.com\/author-tom-ozimek\"><\/a><\/p>\n<p>Follow<\/p>\n<\/div>\n<p>Tom Ozimek has a broad background in journalism, deposit insurance, marketing and communications, and adult education. The best writing advice he&#8217;s ever heard is from Roy Peter Clark: &#8216;Hit your target&#8217; and &#8216;leave the best for last.&#8217;\n<\/p>\n<\/p><\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Federal Reserve Chair Jerome Powell said he thinks it\u2019s rather \u201clikely\u201d that the forces of de-globalization will mount, leading to a more fractionalized new normal characterized by higher inflationary pressures,<\/p>\n","protected":false},"author":1,"featured_media":2315279,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mo_disable_npp":"","fifu_image_url":"","fifu_image_alt":"","footnotes":""},"categories":[],"tags":[],"class_list":["post-1534520","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry"],"_links":{"self":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1534520","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/comments?post=1534520"}],"version-history":[{"count":0,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/posts\/1534520\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media\/2315279"}],"wp:attachment":[{"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/media?parent=1534520"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/categories?post=1534520"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.conservativenewsdaily.net\/breaking-news\/wp-json\/wp\/v2\/tags?post=1534520"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}