Powell: ‘No reason’ to Think Economy is Close to Recession

(The Hill) - Federal Reserve Chair Jerome Powell said Friday that there’s “no reason” to think the U.S. economy is close to a recession.

“Growth is strong,” Powell said at a conference in San Francisco. “As I mentioned, the economy is in a good place. There is no reason to think the economy is in a recession or is at the edge of one.”

The U.S. economy has largely defied expectations over the past year and a half, avoiding the recession that many economists were anticipating at the end of 2022.

In what many have declared a “soft landing,” inflation has come down significantly without triggering a major economic downturn. After peaking at 9.1 percent in June 2022, one measure of inflation, the consumer price index (CPI), has since fallen to 3.2 percent.

The labor market has also remained surprisingly resilient in the face of repeated interest rate hikes by the Fed, as the central bank has attempted to tamp down inflation.

The economy added 275,000 jobs last month, while the unemployment rate sat at 3.9 percent, continuing the longest sub-4 percent streak since the late 1960s.

At its latest meeting earlier this month, the Fed opted to hold its baseline interest rate steady once again at a range of 5.25 to 5.5 percent, where it has remained since last summer. Powell has maintained that the central bank needs to see more “good” data before cutting rates.

“Inflation has eased substantially while the labor market has remained strong. And that is very good news,” Powell said at a press conference last week. “But inflation is still too high. Ongoing progress in bringing it down is not assured. And the path forward is uncertain.”

A separate inflation gauge closely monitored by the Fed, the personal consumption expenditures (PCE) price index, showed a slight uptick last month, according to new data released Friday.

PCE inflation rose 0.3 percent over the previous month and 2.5 percent year-over-year in February, the data showed.

However, Powell said Friday that the latest numbers were “pretty much in line with our expectations,” emphasizing that the Fed still expects inflation to gradually “come down on a sometimes bumpy path.”

By Julia Shapero
March 29, 2024