Recession fears have ‘ended,’ a Fed governor says.

The New York Times
By Jim Tankersley

Fears that the U.S. economy slipped into recession earlier this year have “faded away,” empowering the Federal Reserve to continue to swiftly raise interest rates to tame inflation without imperiling the recovery from the pandemic-induced recession, a top Fed official said on Friday.

Christopher Waller, a Fed governor, said at the Vienna Macroeconomics Workshop in Austria that continued signs of strong job creation and consumer spending showed that the economy did not fall into recession, even though the Commerce Department reports that the economy contracted in the first half of the year.

“Since I last spoke in July, I think the argument that we entered a recession in the first half of 2022 has pretty much ended — we didn’t,” Mr. Waller said. “With each passing week, the absence of any indication of a recession in spending or employment data buries that recession argument a little deeper.”

What the data show, he said, is an economy that is slowing but still growing — and one with rapid price growth that will require more aggressive efforts from the Fed to bring under control. Despite some recent signs that inflation is moderating, in large part thanks to the decline in gasoline prices, Mr. Waller said he didn’t “yet see convincing evidence that it is moving meaningfully and persistently down along a trajectory to reach our 2 percent target.”

Mr. Waller said he would continue to support “significant” rate increases to further slow the economy and bring down inflation, adding fuel to investors’ bets that the Fed will raise rates by three-quarters of a percentage point this month. He also said he expected the central bank to continue raising rates into 2023.