Fed Chair Jerome Powell plans to continue interest rate hikes, which he warns could lead to a recession

Federal Reserve Chairman Jerome Powell signaled the U.S. economy is at risk of tipping into a recession.

Despite the central bank's best efforts to pull down inflation by increasing interest rates and slowing demand, he warned Wednesday that the soft landing for the economy the Fed had been working toward could be "very challenging."

"The other risk, though, is that we would not manage to restore price stability and that we would allow this high inflation to get entrenched in the economy," Powell said at a Senate Banking Committee hearing.

"We can't fail on that task. We have to get back to 2% inflation."

The central bank generally views 2% inflation as the normal, desired baseline. As of May, the inflation rate sat at 8.6%, a 40-year high.

The Fed has raised interest rates three times since March, and it said it would continue on that path through the rest of the year. Powell said central bank officials "anticipate that ongoing rate increases will be appropriate."

Worries about economic turbulence have grown in recent months as consumer prices climb on multiple fronts — from gas prices and groceries to airfares and real estate.

For Subscribers

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

FOR SUBSCRIBERSCornell rape allegation spotlights stringent New York state laws that have long drawn criticism

FOR SUBSCRIBERSThe debate over AI’s future rages on both coasts

FOR SUBSCRIBERSDecades-old march dispute reignites in Northern Ireland, threatening political crisis

Market watchers say the Fed is trying to thread the needle of cooling inflation while not tanking the broader economy.

For Subscribers

FOR SUBSCRIBERSAbdul El-Sayed tries to woo MAHA voters as Democrats seek inroads with RFK’s supporters

FOR SUBSCRIBERSKratom-like substances are popping up in a typically benign supplement

FOR SUBSCRIBERSGOP super PAC increases its spending for Sen. Jon Husted in tough Ohio race

FOR SUBSCRIBERSRecords reveal tumultuous marriage between slain New York Times executive and wife

FOR SUBSCRIBERSFrom clean energy warrior to ‘wall of shame,’ James Talarico reverses on a fossil fuel money pledge

FOR SUBSCRIBERSCongressional staff planned official trip with luxury stops in Italy and France weeks before election

FOR SUBSCRIBERSA harrowing ordeal aboard an Israel-bound plane

FOR SUBSCRIBERSOpenAI CEO Sam Altman to skip congressional hearing on rogue AI agents

FOR SUBSCRIBERSKey DOJ lawyers departed Trump ‘grand conspiracy’ probe amid pressure to produce, source says

FOR SUBSCRIBERSTrump’s new AI chatbot often links to a site launched under Clinton 26 years ago

FOR SUBSCRIBERSAt MAHA summit, industry CEOs the movement once vilified take the stage

FOR SUBSCRIBERSThis Paralympian has two goals: Win medals and give away $500,000 to her teammates

FOR SUBSCRIBERSCornell rape allegation spotlights stringent New York state laws that have long drawn criticism

FOR SUBSCRIBERSThe debate over AI’s future rages on both coasts

FOR SUBSCRIBERSDecades-old march dispute reignites in Northern Ireland, threatening political crisis

“Powell and his colleagues are walking a monetary policy tightrope hoping to avoid a recession while dampening demand,” Mark Hamrick, a senior economic analyst at Bankrate, said in a note.

So far, he said, the Fed’s actions have caused stocks to fall and made borrowing much more expensive, especially in the housing market, where mortgage rates are the highest in over a decade.

Investors seemed to shrug off Powell's remarks. The Nasdaq, the S&P 500 and the Dow Jones Industrial Index were all in positive territory at midday Wednesday.