“The question whether we can execute a soft landing or not, it may actually depend on factors that we don’t control,” Powell said in an interview with Marketplace on Thursday, the same day the U.S. Senate confirmed him for a second term as Fed chair. 

“Geopolitical events going on around the world…are going to play a very important role in the economy in the next year or so,” Powell said, without giving specific examples. The U.S. Federal Reserve has previously listed Russia’s invasion of Ukraine and China’s COVID-zero measures as inflationary risks.

Russia’s war in Ukraine has caused a spike in commodity prices as the conflict has halted supplies from both countries. U.S. gas prices have reached record highs owing to disrupted supply from Russia, one of the world’s leading producers of oil and gas. Fighting in Ukraine is also disrupting flows of critical commodities like wheat and sunflower oil.

Meanwhile China’s COVID-zero policy threatens to add to inflationary pressure by snarling supply chains. Lockdown policies implemented to stamp out Omicron outbreaks in cities like Shanghai have forced factories to shut down and clogged ports, slowing the export of goods. Industries in the U.S. are already suffering the effects of China’s lockdown. The Washington Post reports that some hospitals are delaying medical scans because of a shortage in China-sourced medical equipment. 

“Economies all around the world have been hit by a series of inflationary shocks,” said Powell. “We’re all facing the same kind of issues.”

The European Union reported annual inflation of 7.8% in March, the highest recorded rate since the euro was implemented in 1999. Factory and consumer prices in China rose by 8% in April, beating estimates of 7.8%. 

‘Some pain’

The Fed chair also clarified his comments from March, when he said that tightness in the U.S. labor market is at “an unhealthy level.”

The ability of Americans to “go find jobs they prefer [and] that pay better” was a good thing for the economy, Powell said Thursday. “The quit level’s at an all-time high, and wage increases are very high,” noted Powell. “All of us think that’s great.”

Powell said he hoped to “get inflation back down to 2% without having the economy go into recession, or, to put it this way, with the labor market remaining fairly strong.”

Earlier this month, the Federal Reserve raised interest rates by a half percentage point to help get U.S. inflation under control. The U.S. Labor Department on Wednesday reported an annual rate of inflation of 8.3% in April, down slightly from the 8.5% recorded in March, a four-decade high. Powell told Marketplace that further 50-basis point hikes were likely in June and July.

Yet economists are worried about the risk of a recession. U.S. markets have had the worst start to a year since 1939, with the benchmark S&P 500 down 18% so far in 2022. 

Powell admits that some Americans will be hurt by the Fed’s efforts to fight inflation. 

“The process of getting inflation down to 2% will also include some pain,” says Powell, “but ultimately the most painful thing would be if we were to fail to deal with it.”