High inflation has triggered concerns over a recession, but one steward of the U.S. economy argued Wednesday that the health of the labor market makes a clear case against these concerns.
“I do not think the U.S. is currently in a recession,” Federal Reserve Chair Jerome Powell told reporters on Wednesday.
These comments came during a press conference that followed the central bank's decision to again raise interest rates by 0.75%.
Powell's commentary also comes a day before the Bureau of Economic Analysis is set to release its first reading on U.S. economic growth for the second quarter.
Following a negative reading in the first quarter, another quarter of contraction could intensify the discussion over what constitutes a recession — and whether or not the economy is already in one.
For his part, the Fed chair pointed to strong employment figures, with June data showing the unemployment rate at a relatively low 3.6%. In the first half of 2022, employers hired 2.7 million people.
“There’s just too many areas in the economy that are performing well,” Powell said.
Powell nonetheless acknowledged that certain pockets of the U.S. economy are feeling the crunch from high inflation as the pace of price increases erodes wage gains.
The central bank moved on Wednesday to lift interest rates to a target between 2.25% and 2.5% in its second consecutive 0.75% increase. Powell said the Fed will move “expeditiously” to raise rates further.
“Over the coming months, we’ll be looking for compelling evidence that inflation is moving down,” Powell told reporters, reiterating hopes that higher short-term borrowing costs could take steam out of some economic activity.
The Fed chief acknowledged that avoiding a recession in the future has become more difficult, as the war in Ukraine continues to put upward pressure on energy prices. For Fed policymakers, the challenge is dampening demand enough to depress inflation without hitting the brakes so hard that businesses lay people off.
“We continue to think that there’s a path to that [outcome],” Powell said. “We know that path has clearly narrowed, really based on events that are outside of our control.”
The Fed’s next policy announcement is scheduled for September 21, though Fed officials will likely provide further updates on their thinking at its annual conference in Jackson Hole, WY in late August.
Brian Cheung is a reporter covering the Fed, economics, and banking for Yahoo Finance. You can follow him on Twitter @bcheungz.