THE US ECONOMY doesn’t appear to be headed toward a recession, Federal Reserve Bank of San Francisco President Mary Daly said.
“When I look at the data coming in, I see solid domestic momentum that points to a continued economic expansion,” Daly wrote Tuesday in a post on Quora.com, citing data on labor markets and consumer spending.
“But considerable headwinds, like weaker global growth and trade uncertainties, have emerged — and they’re contributing to this fear we see in the markets that a downturn is right around the corner,” she said. “So one thing I’m looking closely at is whether the mood gets so out of sync with the data that the fear of recession becomes a self-fulfilling prophecy.”
Fed officials cut interest rates on July 31, marking the first reduction since the financial crisis 10 years ago, and signaled more easing may be coming. Fed Chair Jerome Powell is set to speak Friday at the central bank’s annual conference in Jackson Hole, Wyoming, and investors will be listening to see whether he ratifies expectations for further moves in coming months.
So far, easier Fed policy has not been enough to allay concerns about the prospects for the economy. Daly’s comments echo those of White House advisers including Larry Kudlow and Peter Navarro, who took to television over the weekend to downplay recession fears after a volatile week in financial markets — which included the largest single-day decline of the year for the Dow Jones Industrial Average.
“I do believe this was an appropriate recalibration of policy in response to the headwinds we’re facing — along with inflation rates that continue to come in under our 2% target,” Daly said. “However, I should stress that my support for this cut is based around my desire to see our economic expansion continue — not because I see an impending downturn on the horizon.” — Bloomberg