January 14, 2019 — Powell Tries to Dispel Recession Fears


Last Thursday, Fed Chair Jerome Powell addressed the Economic Club of Washington DC.  He doesn’t think the US economy is on the verge of a recession. Rather, he thinks “The US economy is solid. It has good momentum coming into this year.”

Powell said the Fed is watching the situation closely and is monitoring potential cracks in the economy.  His principal concern is the weakening growth in China and Europe, but he thinks 2019 will remain solid.  Powell also warned a prolonged US government shutdown could place a drag on the economy, and the effects will show up in the data. But with the shutdown in effect, no data will be released, making it harder to understand how the economy is doing.

The Fed is predicting 2.3 percent growth this year, below the 3 percent experienced in 2018.  Recessions are usually associated with rising inflation followed by increases in interest rates, or market bubbles.  Powell doesn’t see those risks on the horizon.  Powell responded to a question on an interest rate hike this month; his answer was interpreted to be “no.”