Speaking at an event in New York, St. Louis Fed President James Bullard reiterated that the central bank probably should increase its benchmark rate to a range of 3.75% to 4% by the end of the year.
Evans said he is hopeful that a path to a 3.5% federal funds rate by the end of the year via a half-point increase at the September meeting and quarter-point increases at policy meetings in November and December is “still reasonable.”
If inflation doesn’t show signs of improvement, the FOMC “might have to rethink the path a little bit higher, but I would be a little nervous about responding too much, too early,” he said.
Last week, before the release of GDP data, Powell pushed back on suggestions that the US is already in a recession.
The National Bureau of Economic Research’s business-cycle dating committee -- the official arbiter of US recessions -- does not adhere to the two-quarter-contraction view. Instead, the group of eight elite academic economists looks at half a dozen monthly economic reports to see a “significant decline in economic activity that is spread across the economy and that lasts more than a few months.”
Bullard said the US economy is unlikely to experience a recession, and that the Fed “may be able to disinflate in an orderly manner and achieve a relatively soft landing,” where it slows inflation without sparking a contraction.
Mester said the slowing seen in some data points isn’t enough to label the US economy as being in a recession. A pullback in activity is what the Fed wants to engineer in order to get demand in line with the constrained supply side of the economy.
“When a recession is in place, you will see the labor market deteriorate pretty rapidly, and certainly right now, the labor market is very healthy,” she said. “My forecast for this year is that we will be growing below trend, but that’s necessary in order to get price increases under control.”
--With assistance from Craig Torres.
This article was provided by Bloomberg News.