Victoria Cavaliere and Craig Torres / Bloomberg News (TNS)
White House economic adviser Brian Deese paused on the cusp of ruling out a US recession while the Federal Reserve fights inflation, saying the central bank needs space to do its job.
Deese, the director of the National Economic Council, said this approach reflects President Joe Biden’s pledge to make curbing the biggest consumer price hikes in four decades his “top priority.”
“We need to give the Fed the space and independence to do its job of controlling inflation,” Deese said Sunday on CNN’s State of the Union. “There are always risks,” he said when asked if the US was headed for a recession.
Consumers are experiencing the highest inflation in decades, caused by expansionary fiscal and monetary policies combined with supply shortages and rising food and energy costs in the wake of the Russian invasion of Ukraine. A consumption-linked price measure closely tracked by the Fed rose 6.6% in the 12 months to March, while another measure, the CPI, rose 8.3% for the year to April, gaining belongs to the highest values for decades.
US central bankers say restoring prices to their 2% inflation target is their top priority. They raised the benchmark interest rate by half a percentage point earlier this month after raising it by a quarter point in March, and Chair Jerome Powell said the Policy Committee plans to raise it further in half-point increments in the next few meetings. Powell also said there was a “good chance” that the Fed could ease inflation back towards its 2% target without a “severe” downturn or “materially high” unemployment.
Americans are increasingly pessimistic about the economy, the stock market and inflation, according to a CBS News poll released Sunday, which showed the proportion of people saying the economy is bad fell to 69 this month % has increased compared to 46% in April 2021 and 64% last November. The May 18-20 poll has an error margin of plus or minus 2.5 percentage points.
Deese said the US economy is in transition to “more stable and resilient growth.”
“While there are primarily absolute risks of inflation, this is the most important thing: The United States is better positioned than any other major economy to bring down inflation and address these challenges without giving up all of the economic gains that we have made and that lies in the strength of our recovery,” Deese said on Fox News Sunday.
Reports on factory production and consumer spending showed that economic growth remained solid at the start of the second quarter. The number of employed rose by 428,000 last month, with the unemployment rate remaining at 3.6%.
Financial markets are at least pricing in the risk of slower growth as the Standard and Poor’s 500 Index is down 18% year-to-date. Futures markets are expecting the Fed’s interest rate to peak at over 3% sometime next year.
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