WASHINGTON (AFP) – Concerns the US economy will face a downturn amid the Federal Reserve’s aggressive interest rate increases have been exaggerated, a top Fed official said on Thursday (July 7).
The world’s largest economy still has a “spectacular” jobs market, and there are signs price pressures are starting to ease, Fed governor Christopher Waller said.
The central bank last month implemented the biggest interest rate increase in nearly 30 years, and signalled a similar move was possible this month as policymakers worried inflation was getting entrenched.
That fuelled an upsurge in predictions that US economy will collapse.
“I personally think some of the fears of a recession are kind of overblown,” Waller said during a fireside chat with the National Association for Business Economics (NABE).
The US is facing the highest price surge in more than 40 years – with Americans squeezed by rising costs for food, fuel and housing – made worse by the war in Ukraine.
Waller stressed that getting inflation down is the primary goal, even if that means inflicting some pain through a slowing economy.
He advocates “front loading” of rate hikes, with another super-sized increase in the key lending rate later this month, followed by a big step in September, after which the central bank can move to smaller hikes depending on how inflation and the economy behave.
The Fed’s policy committee “is dead set on getting inflation under control,” to avoid a repeat of the 1970s, he said, referring to the period when growth flatlined amid an inflationary spiral.
“We’re not going to let that happen,” he said.
“We may have to take the risk of causing some economic damage,” he acknowledged, but given how strong the job market is the moves are unlikely to cause “a real severe recession.”
source https://netdace.com/latest-news/us-recession-fears-overblown-says-feds-waller/