April 14 (Reuters) – Chicago Fed President Austin Goolsby said Friday that a U.S. recession is certainly possible as the Federal Reserve’s sharp interest rate increases over the past year permeate the entire economy, as he again urged the central bank. Be careful about the policy.
“There’s no way you can look at current conditions around the world and in the United States and not think that some moderate recession is definitely on the table as a possibility,” Goolsby said in an interview with CNBC.
He was responding to a question about expectations from Fed staff that banking sector pressures will push the economy into recession later this year. “The data shows that and we’ve raised interest rates by about 500 basis points in a year,” he added.
The economy is beginning to show signs of faltering due to rising interest rates as inflation pressures, by some measures, continue to slowly recede. The Commerce Department reported on Friday that retail sales fell more than expected in March.
The US central bank raised its benchmark interest rate by 25 basis points to a range of 4.75%-5.00% at its March meeting as it nears a peak in rates.
Most Fed policymakers have since continued to stress the need to focus on getting inflation back to the central bank’s 2% target, with the exception of Goolsby and San Francisco Fed President Mary Daley.
On Friday, Fed Governor Christopher Waller added weight behind the prospect of another quarter-percentage-point hike on May 2-3, saying the central bank’s lack of progress in bringing down inflation means rates need to rise.
Atlanta Fed President Rafael Bostick told Reuters in an interview also on Friday that the Fed may “hit the level and hold” by raising interest rates again.
Goolsby said economic data coming in ahead of the May meeting would inform his view of whether the Fed should raise interest rates again, particularly how tight credit conditions were after the collapse of two US regional banks last month, even as he sounded dovish.
“We still have several weeks before the FOMC meeting, so I don’t want to get to the bottom line what that will mean for what I’m going for, but let’s just keep in mind that we’ve brought up a lot,” Goolsby said. “It takes time for it to work its way through the system…let’s not be too aggressive.”
(Reporting by Lindsay Dunsmuir) Editing by Chizu Nomiyama
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