Federal Reserve Chairman Jerome Powell said Wednesday that he does not believe the US economy is currently in a recession, although he acknowledged that it is losing momentum and that the path for the Fed to avoid a slowdown continues to narrow.
“I don’t think the economy is in a recession right now,” Powell told a news conference after the central bank’s latest two-day monetary policy meeting.
However, Fed officials do believe the economy needs a period of below-potential growth to create enough slack to reduce inflation.
The central banker said another “unusually large” increase in interest rates may be appropriate at the monetary policy meeting in September, but that the decision will be determined by economic data.
The Fed’s decision on whether to make a third consecutive 75 basis point hike – or something else – will depend on whether there is firm evidence that inflation is starting to ease, he said.
The lack of visibility into the future path of the economy means the Fed could provide reliable guidance on where its monetary policy is headed only on a “meeting-by-meeting” basis, Powell added.
There is now “significantly” more uncertainty than normal, which means that central bank officials cannot provide the long-term guidance on the level and path of interest rates that they had in the past.
Earlier, the Fed announced its fourth consecutive rise in its reference interest rate, by 75 basis points, to take it to a range between 2.25% and 2.50%.
“Recent spending (consumption) and production indicators moderated. But job creation remained robust in recent months, and the unemployment rate remains low,” the central bank summarized announcing its decision in a statement published at the end. of the meeting of its monetary policy committee (FOMC) that began on Tuesday.
With information from agencies
