Powell: Raising Interest Rates Could Lead to Recession

    Photo: The Washington Post

    The Facts

    • Federal Reserve Chairman Jerome Powell acknowledged on Wed. that the Fed's efforts to bring down inflation by raising interest rates could potentially tip the US economy into a recession.

    • When asked by Sen. Elizabeth Warren (D-MA) at a Senate Federal Open Market Committee hearing whether increased interest rates could lead to a recession without stopping inflation, he said "it's certainly a possibility."


    The Spin

    Republican narrative

    First, Powell admitted that inflation was soaring before the Russian invasion of Ukraine, and now he's saying that the administration and Fed's attempts to lower prices and stop a recession could very well fall short on both. Americans aren't buying Biden's excuses anymore and Powell's most recent testimony only solidifies this.

    Democratic narrative

    With the war in Ukraine raising the cost of gas around the world and China's recent lockdown, increased inflation was inevitable. The Fed needs to cool the economy down by raising interest rates, even if it means risking a recession. This is the only way we'll be able to finally get back to a stable and sustainable economic growth.

    Nerd narrative

    There's a 60% chance that the US will enter a recession by January 1, 2023, according to the Metaculus prediction community.


    Political split

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    RIGHT

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