After a year’s worth of warnings around a nationwide economic downturn, Federal Reserve Chair Jerome Powell on Wednesday said the central bank’s staff are no longer forecasting a recession, as the Fed aims to stem inflation by raising interest rates without causing an economic downturn.
Federal Reserve Chair Jerome Powell said the Fed is no longer predicting a recession.
Powell said in a press conference the “resiliency in the economy” recently prompted Fed staff to downgrade their forecast, which Powell noted is “independent” of the predictions made by members of the Fed’s rate-setting committee.
The Fed had predicted a “mild recession” in April, and notes from the Federal Open Markets Committee said last month it was “quite likely” for the economy to tip into a recession this year, but that recession would be “neither deep nor prolonged.”
The new forecast comes on the heels of the Fed’s decision on Wednesday to raise interest rates by 25 basis points to a 22-year high, after leaving rates steady last month, as the Fed continues its aggressive rate hikes in an attempt to combat high inflation.
When asked about inflation, Powell said the Fed has “seen the beginnings of disinflation without any real costs in the labor market.”
The Fed’s campaign to hike interest rates has prompted fears of a recession, as rate increases usually stem inflation at the cost of slowing the economy. After reaching a 40-year high last summer, inflation last month fell to its lowest point in more than two years, with the Labor Department’s consumer price index coming in 3% higher than it was in June 2022—still somewhat above the Fed’s 2% target. The Fed also paused interest rate increases last month for the first time in more than a year amid signs stubbornly high inflation was continuing to cool, though Powell indicated at the time more rate increases could follow. Also last month: layoffs dropped to a seven-month low after a seemingly endless stream of job cuts over the past 12 months centered primarily around manufacturing, tech and banking.
Fed Hikes Interest Rates By 25 Basis Points To Highest Level Since 2001 (Forbes)
Inflation Slides To 2-Year Low—But Price Increases Stay Sticky (Forbes)