ST. LOUIS – The US central bank should continue raising interest rates on the back of recent data showing inflation remains persistent while the broader economy seems poised to continue growing, even if slowly, St. Louis Federal Reserve President James Bullard said.
In comments countering views that the US is heading towards a banking crisis, a recession, or both in the near future, Bullard told Reuters in an interview: “Wall Street’s very engaged in the idea there’s going to be a recession in six months or something, but that isn’t really the way you would read an expansion like this.”
Investors may see rate cuts in the Fed’s near future, part of a recession-breeds-accommodation view of the world, but “the labor market just seems very, very strong. And the conventional wisdom is that if you have a strong labor market that feeds into strong consumption … and that’s a big chunk of the economy … it doesn’t seem like the moment to be predicting that you have a recession in the second half of 2023,” he said.
Despite the current 3.5 percent unemployment rate, Fed staff at the central bank’s March 21-22 policy meeting said they also anticipate a “mild recession” this year, while Bullard’s colleagues have penciled in an economic outlook that indicates zero growth or a contraction for much of the rest of the year after a relatively strong first quarter. – Reuters
