The United States can escape the recession, hopes a Fed governor

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

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

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

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

And that’s likely to weigh on jobs, she warned, as the slowing economy will likely mean job creation will also slow.

There are costs and risks of tightening policy (monetary, editor’s note) to reduce inflation, but I consider that the costs and risks of letting inflation persist are much greater, she nevertheless judged.

As for the pace of rate hikes and how far rates will have to go, that will depend on the data and (on) their 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.

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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 CPI index, which refers, also showed a sharp slowdown in November, 7.1% over one 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.

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