In fighting inflation, which last year hit a four-decade high, the Fed has raised its benchmark rate 11 times in 17 months, most recently on Wednesday. The resulting higher borrowing costs for a broad range of loans — from mortgages and credit cards to auto loans and business borrowing — have taken a toll on growth. But they have yet to tip the United States into a widely forecast recession.
At a news conference Wednesday after the Fed announced its latest quarter-point rate hike, Chair Jerome Powell revealed that the central bank’s staff economists no longer foresee a recession in the United States. In April, the minutes of the central bank’s March meeting had revealed that the Fed’s staff economists envisioned a “mild” recession later this year.
“My base case is that we will be able to achieve inflation moving back down to our target without the kind of really significant downturn that results in high levels of job losses,” the Fed chair said.By any measure, the American job market has shown itself to be remarkably strong. At 36 percent in June, the unemployment rate hovers just above a five-decade low.
Indeed, many consumers are finally enjoying some relief from spiking prices: Year-over-year inflation, which peaked at 9.1 percent in June 2022, has eased consistently ever since. Inflation-adjusted hourly pay rose 1.4 percent in June from a year earlier, the sharpest such gain since early 2021.
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