While aiming for a 'soft landing,' Fed Chair Powell warns that cooling inflation without plunging into a recession will be 'challenging'

• Cooling inflation without sparking a recession will be "challenging," Fed Chair Powell said Tuesday.
• The Fed aims to achieve a "soft or soft-ish" landing, but many economists doubt such a scenario is possible.

The Federal Reserve sees several routes for solving the inflation problem without falling into a recession, but none of them will be easy, Chair Jerome Powell said Tuesday.

The central bank is entirely focused on a single objective: a "soft landing" for the US economy. The phrase describes the ideal scenario in which inflation returns to the Fed's 2% target while unemployment remains low.

Yet trying to accomplish such a landing will require some careful maneuvering. The Fed has started to slow economic growth with rate hikes, but if spending cools too quickly, companies could halt their hiring plans or even lay off workers.

"It's going to be a challenging task, and it's been made more challenging in the last couple of months because of global events," Powell told Nick Timiraos of The Wall Street Journal during a conference, referencing Russia's invasion of Ukraine and rolling lockdowns in China.

Many on Wall Street aren't convinced the Fed can pull it off. Economists at Deutsche Bank, Bank of America, and other banking giants have penciled in near-term recessions in recent weeks, arguing the central bank moved too late to cool inflation, and that catching up will almost certainly pull the economy into a downturn.

Powell said Tuesday that he doesn't "know anything that they don't," but noted that, with the unemployment rate at historic lows, there's room for growth to slow without assuring a recession.

"You would still have quite a strong labor market if unemployment were to move up a few ticks," he said. "There are a number of plausible paths to having a soft or soft-ish landing. Our job isn't to handicap the odds, it's to try to achieve that."

When asked to clarify what a "soft-ish" outcome would look like, Powell likened it to a bumpy but otherwise successful airplane landing.

"Sometimes the landing is just perfect, and sometimes it's just a little bumpy," he said. "It's still a good landing, you don't even notice it, right?"