Fed Chair Says US May Have Dodged Recession

Congressional Budget Office is also predicting 'soft landing'
By Rob Quinn,  Newser Staff
Posted Jul 27, 2023 6:37 AM CDT
Fed Is No Longer Predicting a Recession
Federal Reserve Chair Jerome Powell speaks during a news conference at the William McChesney Martin Jr. Federal Reserve Board Building following a Federal Open Market Committee meeting on Wednesday, July 26, 2023 in, Washington.   (AP Photo/Nathan Howard)

The Federal Reserve believes its policies may have helped the US economy avoid recession and achieve a "soft landing," a possibility analysts once saw as remote. In remarks after the latest interest rate rise was announced Wednesday, Fed Chair Jerome Powell said the central bank is no longer predicting that the economy will fall into recession, reports Reuters. "So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession," Powell told reporters.

Powell warned that there was a long way to go for the Fed to achieve its goal of bringing inflation down to its 2% target without high levels of job losses. "I wouldn't use the term 'optimism' about this year," he said. "I would say there's a pathway to a soft landing." In new projections, the Congressional Budget Office also predicted that the US would avoid recession, Politico reports. The CBO forecast that the economy would slow down to a 0.4% annual growth rate before rebounding.

The Fed raised its benchmark short-term interest rate to a range of 5.25% to 5.5% Wednesday, its highest in 22 years. Paul Ashworth, chief North America economist at Capital Economics, tells MarketWatch that Powell "steadfastly refused to bite" when he was asked about the possibility of another interest rate rise in September. In June, the Fed forecast that there would be two more interest rate rises this year. (Read more US economy stories.)

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