US can escape recession, Fed governor hopes

US can escape recession, Fed governor hopes

The United States can escape recession in 2023, while seeing inflation slow down durably, estimated Tuesday Michelle Bowman, one of the governors of the American central bank (Fed).

The employment market in the United States indeed remains very solid, despite the interest rate hikes made by the Fed to fight against inflation.

This represents a “sign of hope that we can succeed in reducing inflation without a major economic slowdown,” said Ms. Bowman in a speech to the Florida Bankers Association in Miami.

The unemployment rate even fell in December, to 3.5%.

In the coming months, the central bank should continue to raise interest rates, because “inflation is far too high”, pointed out Ms. Bowman.

And “it is likely” that this will weigh on employment, she warned, because “the slowdown in the economy will probably mean that job creation will also slow down”.

“There are costs and risks in tightening (monetary) policy to reduce inflation, but I consider that the costs and risks of letting inflation persist are much greater,” she said. nevertheless judged.

As for the pace of rate hikes and how far rates will have to go, that will depend on “the data and (the) implications for the outlook for inflation and economic activity,” she said.

“I expect that once we get to a sufficiently restrictive rate, it will stay at that level for some time to restore price stability,” the governor added.

Inflation fell in November to 5.5% over one year, against 6.1% in October, according to the PCE index, favored by the Fed, and which it wants to reduce to 2%.

Another measure, the benchmark CPI, also showed a sharp slowdown in November, to 7.1% year on year. December data will be released on Thursday.

The Fed had, at its last meeting in mid-December, raised its key rate by half a point, bringing it to the range of 4.25 to 4.50%, its highest level since 2007. The next meeting is scheduled for January 31 and February 1.