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US Treasury Secretary Janet Yellen said she was hopeful the Federal Reserve could achieve a soft landing, but it'll take skill and luck.
"The Fed is going to need great skill and also some good luck to achieve what we sometimes call a soft landing," Yellen said in a Sunday interview with CNN.
A soft landing is the Fed's ideal scenario in which inflation cools down to its 2% target while unemployment remains low.
"My hope is that we will achieve a soft landing, but Americans know that it's essential to bring inflation down and, over the longer run, we can't have a strong labor market without inflation under control," she said.
Yellen's remarks come on growing concerns that the US economy could tip into a recession as the Fed hikes interest rates to combat inflation. "It's certainly a risk that we're monitoring," Yellen said.
Inflation cooled through July after reaching 41-year highs the month before on soaring energy costs. With the latest data on US CPI out Tuesday, analysts at Deutsche Bank said they expect a slight decline.
But that doesn't mean the Fed will go easy on its monetary policy, according to leading market voices. Former Fed Vice Chair Richard Clarida said the central bank will raise rates to 4% come "hell or high water."
The fed funds rate is currently at a target range of 2.25%-2.50%, and central bankers are largely expected to approve another 75-basis-point increase at their September 20-21 meeting.
In response to the Fed's anticipated hikes, Yellen said: "We want to see a strong labor market and inflation coming down to more normal levels."
Her optimism over a soft landing differs from what analysts at BlackRock have to say. They predict the Fed may not be able to avoid a recession and may not be able to bring inflation back to the 2% target.
JPMorgan similarly warned a recession could be possible, as the Fed deals with a tough balancing act of reducing inflation while maintaining economic growth.
