President John Williams Of The New York Federal Reserve stated that a U.S. Recession is not his Base Case Scenario.

President John Williams of the New York Federal Reserve said Tuesday he expects the U.S. economy to avoid a recession even though he believes significantly higher interest rates are needed to contain inflation. “A recession is not my base case right now,” Williams told CNBC’s Steve Liesman during a live “Squawk Box” interview. “I think the economy is strong. Clearly, financial conditions have tightened, and I’m expecting growth to slow this year quite a bit relative to what we had last year.”
Quantifying that, he said he could see gross domestic product gains reduced to about 1% to 1.5% for the year, a far cry from the 5.7% in 2021, which was the fastest pace since 1984. “But that’s not a recession,” Williams noted. “It’s a slowdown that we need to see in the economy to really reduce the inflationary pressures that we have and bring inflation down.” Prices rose 8.6% from a year ago in May, the highest level since 1981, according to the most commonly followed inflation indicator. However, it remains well above the Federal Reserve’s 2% target, a measure the Fed prefers. In response, the Federal Reserve has increased interest rates three times this year, totaling about 1.5 percentage points. According to recent projections, Federal Open Market Committee, which sets interest rates, says more are expected to follow. According to Williams, it is likely that the federal funds rate, which banks charge one another for overnight borrowing and serves as a benchmark for many consumer debt instruments, may rise from its current target range of 1.5% to 1.75 percent to 3%-3.5%. He said, “we’re far from where we need to be” on rates.

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