Powell: ‘No reason’ to think economy is close to recession

Federal Reserve Chairman Jerome Powell said Friday there is “no reason” to think the U.S. economy is approaching a recession.

“Growth is strong,” Powell said at a news conference in San Francisco. “As I said, the economy is in good shape. There is no reason to think the economy is in or on the brink of a recession.”

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

Many are proclaiming a “soft landing” in which inflation has fallen significantly without causing a major recession. The Consumer Price Index (CPI), one of the indicators of inflation, peaked at 9.1% in June 2022, but has since declined to 3.2%.

The labor market has remained surprisingly resilient despite the Fed’s repeated interest rate hikes as the Fed tries to keep inflation in check.

The economy added 275,000 jobs last month, but the unemployment rate remained at 3.9%, continuing its longest streak below 4% since the late 1960s.

At its most recent meeting earlier this month, the Fed opted to keep its benchmark interest rate on hold again in the 5.25% to 5.5% range, where it has remained since last summer. Powell insisted the central bank needed to see more “good” data before cutting rates.

“While the labor market remains strong, inflation has eased significantly. That’s very good news,” Powell said at a press conference last week. “But inflation remains too high. Continued progress in bringing it down is not guaranteed. And the path forward is uncertain.”

The personal consumption expenditures (PCE) price index, another inflation measure closely monitored by the Fed, rose slightly last month, according to new data released Friday.

According to the data, the PCE inflation rate in February rose 0.3% from the previous month and 2.5% from the same month last year.

But Powell said Friday that the latest numbers were “very much in line with our expectations,” emphasizing that the Fed still expects inflation to gradually “follow a bumpy path at times.”