Central Bank forecasts in mid-June see US GDP growth of 1.7% in 2022, instead of the 2.8% previously estimated. (Photo: 123RF)
Washington — The US economy is slowing, but not to the point of falling into recession, the president of the New York branch of the US Central Bank (Fed) said Tuesday.
“A recession is not currently my base case,” John Williams said on CNBC. “I think the economy is strong,” he added, stressing the need to raise interest rates “quickly” to curb inflation.
“I expect growth to slow down a little bit this year compared to what we had last year, (…) to 1%-1.5%,” he continued, noting that it was not a recession, but a slowdown. necessary to curb inflation.
Central Bank forecasts in mid-June see US GDP growth of 1.7% in 2022, instead of the 2.8% previously estimated.
John Williams acknowledged that it was “very difficult to predict a recession, which can happen for many reasons”, and that the economy was not immune to the unexpected.
But he believes that “for now, there is a way forward to reduce inflation and keep the economy growing.”
Asked about the possibility that the world’s largest economy suffers another external shock, such as the war in Ukraine, he replied that the Fed was monitoring “very closely all indicators, financial conditions, commodity prices, raw materials and global growth.” .
The institution is also examining the effects of tighter financial conditions and rising oil prices.
“Right now consumer spending seems to be on the right track, we are seeing a slowdown in some sectors,” he said.
With inflation still at a level not seen in 40 years in May, John Williams said he was convinced of the need to raise key rates further.
“What I’m a little bit more sure of is that we absolutely need the funds rate to go up to between 3.0 and 3.5% by the end of the year,” he said. “I’m very confident at this point.” On the other hand, he said that he was more reserved about next year. “Where exactly we need to be will depend on the economic data,” he added.
John Williams also said he expected a debate at the July meeting in late July between those who want a 0.50 percentage point increase and those who favor a 0.75 point increase.
The Fed has raised rates three times since March, which are now in a range between 1.50% and 1.75% and set the standard for loans granted to individuals and companies.