The Federal Reserve believes that its policies have potentially played a role in preventing a recession and achieving a “soft landing” for the US economy, which was previously seen as unlikely by analysts. Following the announcement of the latest interest rate hike, Fed Chair Jerome Powell stated that the central bank no longer predicts a recession, citing the resilience of the economy as a factor. Powell noted a noticeable slowdown in growth in the forecast for later this year, but the absence of a recession.
Powell cautioned that the Fed still has work to do in order to meet its goal of reducing inflation to the targeted 2% without causing substantial job losses. While refraining from using the term “optimism,” he expressed confidence in the possibility of a soft landing. The Congressional Budget Office also projected that the US would avoid a recession, forecasting a temporary decline to a 0.4% annual growth rate before a rebound.
The Federal Reserve raised its benchmark short-term interest rate to a range of 5.25% to 5.5%, marking the highest rate in 22 years. Paul Ashworth, chief North America economist at Capital Economics, observed that Powell did not entertain the idea of another interest rate increase in September during his press conference. The Fed had previously predicted two more rate increases for the year.
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