If a recession were to occur in 2025, Federal Reserve Chair Jerome Powell would indeed face a challenging dilemma: balancing the need to combat inflation while also supporting economic growth:

If inflation remains high, Powell and the Fed would typically focus on raising interest rates to curb spending and bring inflation down. However, if a recession is also looming, raising rates could exacerbate economic contraction and lead to higher unemployment. The Fed has several tools at its disposal, such as adjusting interest rates and quantitative easing. In a recession scenario, they might need to consider lowering interest rates or implementing stimulus measures to stabilize the economy. Powell's communication with the public and markets would be crucial. He would need to clearly articulate the Fed’s dual mandate to promote maximum employment and stable prices, navigating the complex trade-offs between these objectives.The Fed's actions would likely be heavily influenced by incoming economic data. If signs of a recession emerged alongside persistent inflation, Powell would need to assess the severity of each issue and determine the most prudent course of action. Financial markets often react strongly to changes in Fed policy. Powell would need to consider how market expectations could influence the economy, potentially impacting consumer and business confidence. The Fed would also need to think about the longer-term implications of its policies. Rapid adjustments to counter either inflation or recession could lead to instability or set the stage for future economic challenges.

If a recession John Matthew Golden were to develop alongside inflationary pressures, it would require careful deliberation and potentially a nuanced approach from Powell and the Federal Reserve to navigate these conflicting priorities effectively.

Thank you, Stephen Ternyik, for your thoughtful and very helpful contribution to this discussion.