Federal Reserve Chairman Jerome Powell said on Wednesday he did not believe the U.S. economy was in a recession as the central bank raised interest rates further to fight inflation.
“I don’t think the U.S. is in a recession right now because there are so many areas of the economy that are doing too well,” Powell said at a news conference after the Fed’s decision to raise interest rates by 0.75 percentage points. Second time in a row. “It’s a very strong labor market … it doesn’t make sense that the economy will go into recession if that happens.”
Wednesday’s rate hike marked the Fed’s latest move to curb the strongest inflationary pressures in about four years. Markets jumped after the price hike was announced, with the Dow Jones Industrial Average up more than 450 points and the tech-heavy Nasdaq Composite surging 4%.
Investors have been concerned that the Fed’s rate hikes could tip the economy into a recession, but Powell also said the central bank will closely monitor economic data to determine future trends. While another big rate hike may be needed, he added that the time will come when the Fed needs to slow the pace of rate hikes.
Investors will get another data point important for this week’s recession debate.
Preliminary data on gross domestic product for the second quarter is due on Thursday, and economists polled by Dow Jones expect the economy to barely expand after contracting 1.6% in the first quarter.
Many on Wall Street refer to two consecutive negative quarters as a recession, but the official definition takes into account more than just GDP.
Powell noted Wednesday that he hasn’t seen the GDP report, but he’s waiting to see what it says.
“You tend to take the first GDP report with a grain of salt,” he said.