Fed Chair Powell Predicts No Recession in 2019 (Washington Post)
Last Modified: 03:11 PM, Thu Jan 10, 2019

Fed Chair Jerome Powell predicted the economy is not going to plunge into a deep downturn this year. "I don't see a recession" in 2019, Powell said today. "The U.S. economy is solid. It has good momentum coming into this year." He stressed that the Fed is "watching" the situation closely and monitoring potential cracks in the economy. His biggest concern is weakening growth in China and Europe, although he warned a prolonged U.S. government shutdown could become a drag on the economy. "The principal worry I would have is really global growth," Powell said, but he added: "I still think the mostly likely baseline case for China is another year of solid growth." When asked if the central bank intends to raise rates at its meeting at the end of January, Powell said, "You should anticipate we're going to be patient and watching."

Fed Chair Powell Predicts No Recession in 2019
2019-01-10 

By Heather Long

(Washington Post) -- Federal Reserve Chair Jerome H. Powell, one of the
nation's top economic policymakers, predicted the economy is not going to
plunge into a deep downturn this year.

"I don't see a recession" in 2019, Powell said Thursday in an interview at The
Economic Club of Washington D.C. "The U.S. economy is solid. It has good
momentum coming into this year."

Several prominent economists and investors have said there's a heightened
chance of a recession by 2020. Larry Summers, a Harvard professor and former
Treasury Secretary under former President Bill Clinton, said earlier this week
that he thinks there's "better than a 50/50 chance" of a recession in 2020.

Powell stressed the Fed is "watching" the situation closely and monitoring
potential cracks in the economy. His biggest concern is weakening growth in
China and Europe, although he warned a prolonged U.S. government shutdown
could become a drag on the economy.

"The principal worry I would have is really global growth," Powell said, but
he added: "I still think the mostly likely baseline case for China is another
year of solid growth."

The Fed chair, who has been publicly criticized repeatedly by President Trump
in recent months, warned that if there is an "extended shutdown," it would
have an impact on the economy that "would show up in the data pretty clearly."

JPMorgan has estimated that the partial government shutdown - which is 20 days
old Thursday - is shaving $1.5 billion off the economy each week, a modest
amount in the context of a $20 trillion economy, but the damages will keep
growing.

While there is wide agreement that the U.S. economy will grow more slowly than
the roughly 3 percent rate of 2018, there's a lot of debate about how fast the
slowdown will be. The Fed is projecting 2.3 percent growth this year, but the
precipitous stock market drop in December was partly driven by fears that
growth will be significantly lower than that.

Recessions are typically caused by inflation rising quickly and forcing the
Fed to respond with high interest rates or some sort of bubble in markets. "We
don't see those risks," the Fed leader said.

Powell also noted that it's a problem that the Commerce Department is mostly
shuttered, which means key economic data such as retail sales and GDP growth
won't be released later this month unless the government reopens. That makes
it harder for the Fed - and investors and government officials - to understand
how the economy is doing.

Trump has urged the Fed not to raise interest rates at all this year. The Fed
has projected two more rate hikes, but Powell is now signaling the Fed will be
"patient" on any further hikes.

When asked Thursday if the central bank intends to raise rates at its meeting
at the end of January, Powell said, "You should anticipate we're going to be
patient and watching," which was widely interpreted as a "no."

Wall Street traders see a 99.5 percent chance the Fed won't hike at the end of
January, according to to data compiled by CME Group.

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