Bankrate.com Senior Economic Analyst Mark Hamrick joined Closing Bell to discuss Fed Chair Jerome Powell's latest statements about the U.S. economy, as the central bank signals more interest rate hikes are on the table.

Closing Bell

Jerome Powell Signals Fed's Reach is Limited Amid New Factors Like Pandemic, Ukraine War

but speaking about the economy fetcher Jerome Powell speaking at the european central bank forum in Portugal earlier, echoing his own sentiments that raising rates to restore price stability is key for fighting inflation. Well, Powell also noting there's no guarantee that the Fed contained the out of control prices as the factors driving inflation are different than ever before. Like the pandemic Russia's invasion of Ukraine, I would just put energy supply and prices into turmoil around the world. So joining me now is Mark Hamrick, senior economic analyst at Bankrate dot com. Mark really good to have you on the show so much to break down here in the wake of that disappointing GDP data this morning as well. But this is a pretty stark warning from the Fed. No, well, I think Kristin, it's very consistent with the message that Chairman Powell delivered at his news conference, which was just two weeks ago. They really have not had any substantial data to alter the outlook. We get inflation read in a couple of weeks, we have the employment report coming up as you know, as well as the next report on job openings. And so I think Chairman Powell is really trying to thread the needle here and that needle is to express some degree of confidence that the central bank can accomplish its mandate of stable prices. But acknowledging that there are risks and one of the risk is essentially delivering too much medicine to the patient, the patient being the economy and the medicine being higher interest rates and tighter monetary policy more broadly and the outcome of that if there is essentially an overdose is that we get an actual contraction in the economy that's sustained or recession. So I think he's just trying to be realistic but also expressed some degree optimism that you know as central bankers were not perfect you know but we have to manage risk but also sort of stick to the historical record that central banks do have a tool that can get the job done. But obviously they work with long and variable legs as they like to say. Well certainly I think when the Fed decided to remove that word transitory from a statement in the fall of last year they want to have for seen Russia invading Ukraine on an ongoing basis six months later which started this year at the end of february. But the one thing that does remain uncertain of course is china's zero tolerance covid policy that has no indication of going away. We could still see another variant mark. And so we live in a global world and yes we have vaccinations. Yes we have treatments. Yes that puts the US within the confines of the U. S. In a better position but we know that the supply chain is global and so quantify the risks that are out there. I mean how long could this persist? Well in terms of inflation obviously the Fed looks for its main measure of inflation to persist at a high rate even through next year but not as high next year as what they would be looking for by the end of this year but I think you're absolutely right kristen to zero in on the fact that there are so many inputs into this issue or triggers or influences or causes that any one of them could really upset the balance in terms of the outcome and acknowledging that our expectations can be fooled once again as they have been repeatedly since the pandemic began. But I think you know you have I think we still have to keep Russia and Ukraine at the top of a list of geopolitical uncertainties china broadly whether it's the chinese economy or sort of the military part of that equation with Taiwan obviously the world can turn into a into the soup in a in a quick turn here. So the other outcomes are of course as you acknowledged earlier the fact that the G. D. P. Read for the first quarter came in a little slightly more negative than before and that is a reflection of an american consumer. That's buckling a little bit at least broadly speaking and that's to be expected with this high and sustained inflation, that's one of the costs of this current situation. The supply chains is another good example the semiconductor stocks basically being taken out and shot and if you have a still a messed up supply part of the component and demand that's in question that's inelegant from any way that you look at it. Here's a question mark, the first half of the year. The second quarter technically ends tomorrow. The second half starting on friday july 1st and we did get that disappointing GDP data for the first quarter earlier today, the final read, Do you think we're in a recession? Do you think that the second quarter which ends tomorrow, we'll see a contraction as well? Well, that's a more complicated question than what you're actually asking Chris. And just to be fair to the audience and I understand why you're asking, let me put it this way as we query economists at bank rate, they say that there's a rising risk of recession having basically put that at one and three in the first quarter and now basically 5050 for the next 12 to 18 months. It may well be that as we move on down the road, we will have found that we moved into a recession sooner than we thought. I personally don't think we are in one at the moment, but the other part of that christian is high and sustained inflation for the consumer. It can be every bit as bad, if not worse than the recession that we suffered In March and April of 2020. So it's key for financial markets and everybody else, but we have enough negative going on that we don't have to have a recession and still have, uh, something which can lead to the worst consumer sentiment in many years. As you know, I'm just curious at the jobs market does remain very strong. It's still very tight Mark. And obviously the Fed chair, jerome Powell, echoing those comments in Portugal at the E C. B Forum earlier today. But if we could fall into a recession, as you're saying, economists are seeing increasing chances of what does that mean for the jobs market, well, you would expect the job market to reflect that. But it is interesting when you look at the summary of economic projections from Federal Reserve officials, Either individually or as a group, they don't see the unemployment rate rising above 4.1 collectively, 4.1% over the next two years. And as an individual, the worst forecast in the group is 4.3%. So we've been at 3.6% for several months. Now that seems to be the expectation for the june jobs report. But I would say that, you know, we would be looking very closely at all the jobs data, whether it's job openings, jobless claims employment and unemployment for transition to a weaker economy. But right now that at least in the intermediate term or I should say really the very near term, that's not the expectation, but we need to be on guard for it. Ok. Mark Hamrick, senior economic analyst at Bankrate dot com. Mark, thanks so much for coming on the show