Press conference exchange between RACHEL SIEGEL and Fed Chair Jerome Powell:

user: Hi, Chair Powell. Rachel Siegel from the Washington Post. Thanks for taking our questions. At this point, can you confidently say that the economy has avoided a recession and isn’t heading for one now? And if the answer is “no,” I’m curious about what you’d still be looking for. Thanks.

assistant: I think you can say that there’s little basis for thinking that the economy is in a recession now. I would say that. I think there’s, there’s always a probability that, that there will be a recession in the next year, and it’s a meaningful probability no matter what the economy is doing. So it’s always a real possibility. The question is, is it—so it’s a possibility here. I have always felt, since the beginning, that there was a possibility, because of the unusual situation, that the economy could cool off in a way that enabled inflation to come down without the large job losses that have often been associated with high inflation and tightening cycles. So far, that’s what we’re seeing. That’s what many forecasters, on and off the Committee, are seeing. This result is not guaranteed. It is—it is far too early to declare victory. And there are certainly risks. It’s certainly possible that, that the economy will behave in an unexpected way. It has done that repeatedly through the post—in the post-pandemic period. Nonetheless, where we are is, is we see the things that I—that I mentioned.

user: I’m curious, if you’re looking back on the past year, you talked about “navigating by the stars under cloudy skies.” Can you talk about some of the ways in which the economy surprised you most this year, where you thought it would behave in one way and had to pivot to respond? Thanks.

assistant: So I think forecasters generally, if you go back a year, were very broadly forecasting a recession for this year, for 2023. And not only did that not happen—that includes Fed forecasters and really, essentially, all forecasters; a very high proportion of forecasters predicted very weak growth or a recession—not only did that not happen, we actually had a very strong year, and that was a combination of, of strong demand but also of real gains on the supply side. So this was the year when labor force participation picked up, where immigration picked up, where the distortions to supply and demand from the pandemic—you know, the shortages and the bottlenecks—really began to unwind. So we had significant supply-side gains with strong demand, and we got what looks like a 2½ percent-plus, or a little more than that, growth year at a time when potential growth this year might even have been higher than that, just because of the healing on the supply side. So that was a surprise to just about everybody. I think the inflation forecast is roughly, roughly what people wrote down a year ago, but in a very different setting. And I would say the labor market, because of the stronger growth, has also been significantly better. If you look back at the SEP from a year ago, there was a significant increase in, in unemployment. It didn’t really happen. We’re still at 3.7 percent. So we’ve seen, you know, strong growth, still a tight labor market but one that’s coming back into balance with the—with support from the supply side, a greater supply of labor. It’s a—you know, that’s, that’s what we see, and I think that combination was, was not anticipated broadly.