Treasury bonds and related exchange traded funds strengthened on Wednesday on rising safe haven demand in the face of growing recession fears as the Federal Reserve aggressively tightened its monetary policy to curb inflationary pressures.

Among the better performing non-leveraged ETFs of Wednesday, the Vanguard Extended Duration Treasury ETF (NYSEARCA: EDV) rose 3.3%.

Federal Reserve Chairman Jerome Powell warned that the central bank’s fight against inflation with interest rate hikes could cause an economic downturn, the Wall Street Journal reported.

“It’s certainly a possibility,” Powell said on Wednesday during the first of two days of congressional hearings before the Senate Banking Committee. “We are not trying to provoke and do not think we will need to provoke a recession, but we do think it’s absolutely essential” to bring down inflation, which is at a four-decade high.

“The events of the last few months around the world have made it more difficult for us to achieve what we want,” Powell added. “We’ve never said it was going to be easy or straightforward.”

Powell warned that the Fed plans to raise interest rates until there is clear proof that inflation is slowing toward the central bank’s 2% target. Officials recently raised interest rates by 0.75 percentage points, the largest hike since 1994, and the Fed has signaled that another such hike could happen again at its next meeting.

“The Fed knows that inflation is a problem, they know they need to get their hands around it and rate increases are the only real tool that they have to do that,” Thomas Simons, a money market economist at Jefferies, told Reuters.

However, the aggressive monetary policy tightening is increasing the downward pressure on economic growth. Citigroup is the latest bank to raise its recession projections to 50%, CNBC reported.

“The experience of history indicates that disinflation often carries meaningful costs for growth, and we see the aggregate probability of recession as now approaching 50%,” Citigroup said in a note.

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