Fed Chair Powell vows not to let inflation take hold of the economy

Yahoo Finance reporter Brian Cheung breaks down Federal Reserve Chair Jerome Powell's latest comments about fighting inflation.

Video transcript

DAVE BRIGGS: Fed Chair Jerome Powell speaking today at the European Central Bank Forum. Brian Cheung is here. And, Brian, you've talked about an evolution that it sounds like the Fed chair is taking in the last couple of meetings leading to today.

BRIAN CHEUNG: Yeah, well, everything all about a soft or soft-ish landing, we heard the Fed Chair say earlier in the year it's possible. And then he said, eh, we're looking for soft-ish. And now you have him at the ECB earlier this morning saying, well, there's the chance that the Fed might not be able to lower inflation while also keeping employment at the levels that we're seeing right now. Take a listen to what he said with regards to the possibility of a soft landing from earlier.

JEROME POWELL: There's no guarantee that we can do that. It's obviously something that's going to be quite challenging. And I would also say that the events of the last few months have made it significantly more challenging-- thinking there particularly of the war in Ukraine, which has added tremendously to inflationary pressures around food, and energy commodities, and agricultural chemicals, and industrial chemicals, and things like that.

So it's gotten harder. The pathways have gotten narrower. Nonetheless, that is our aim and we believe that there are pathways to achieve that.

BRIAN CHEUNG: So not necessarily a great thing to hear the pilot go on the intercom and say the pathway is getting a little bit narrower on that soft landing. But, look, with the economic conditions the way they are, it seems like the risks are rising that the Fed might have to see some jobless go up in terms of as they start to raise interest rates. We're going to get another read on inflation tomorrow in terms of the personal consumption expenditures. That might be the next step for the Fed going forward.

DAVE BRIGGS: It sounded a bit like we should accept a new norm on inflation. Am I misinterpreting the words of the Fed Chair today?

BRIAN CHEUNG: Well, the Fed Chair did say in that ECB panel earlier today that it's unlikely that we're going to return to the pre-pandemic dynamic of consistently below 2% year-over-year inflation readings. People will describe that as a disinflationary situation. In fact, at the time, people were saying we would actually like to see a little bit more inflation, because maybe that would coincide with more economic growth.

Of course, it's a little bit hard to say right now whether or not we can get back to that dynamic, because the concern is not to get back to sub-2% inflation, we just need to get something lower than that 8.6% on the CPI that we've been seeing as of late.

SEANA SMITH: I'm a little surprised that the markets didn't react more to his comments, just in terms of the fact that we could see a hard landing-- or at least the chances of that seem to be increasing. Yeah, that would be the argument-- it could already be priced in.

DAVE BRIGGS: Interesting point. Let's hope that's not the case.