US economy ‘quite resilient,’ Fed Chair Jerome Powell says
Written by ABC AUDIO ALL RIGHTS RESERVED on June 28, 2023
(NEW YORK) — Federal Reserve Chair Jerome Powell on Wednesday voiced an optimistic message about the U.S. economy and downplayed the threat of a recession.
“The U.S. economy has actually been quite resilient,” Powell said in Sentra, Portugal, at a conference organized by the European Central Bank.
While acknowledging that a recession is “certainly possible,” he said such an outcome is “not the most likely case.”
“The economy is resilient and still growing, albeit at a modest pace,” he added.
The remarks arrived two weeks after the Federal Reserve paused its aggressive series of interest rate hikes, ending a string of 10 consecutive rate increases that stretched back 15 months.
The Federal Reserve has aimed to roll back price increases by slowing down the economy and slashing consumer demand. The approach, however, risks tipping the economy into a recession.
Inflation has fallen significantly from a peak last summer but remains at a level double the Federal Reserve’s target of 2%.
Data released in recent months suggests that the policy approach has succeeded in slowing economic activity while averting a downturn.
U.S. gross domestic product grew by a sluggish 1.1% annualized rate over the three months ending in March, according to government data.
Consumer spending and hiring, meanwhile, have remained solid.
A jobs report earlier this month showed that the labor market grew robustly in May, adding 339,000 jobs compared to Wall Street estimates of just 195,000.
“The labor market is really pulling the economy,” Powell said. “It’s a very strong labor market.”
Despite continued strength, labor market growth has slowed from its previous breakneck pace, suggesting that demand for workers has waned and in turn employers have faced less pressure to offer high wages, Powell said.
A slowdown of wage increases offers hope for the inflation fight, he added.
“We’re getting the softening we need,” Powell said. “We’re getting it slower than expected but it’s nonetheless happening.”
“In my view, the least unlikely case is that we do find a way to better balance without a severe downturn,” he added.
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