Federal Reserve press conference, 2023-02-01 — Chair Jerome Powell

Question (Michael McKee, Bloomberg): Michael McKee from Bloomberg TV and Radio. I’d like to pick up on what you were just saying about a substantial downturn and ask, with the full weight of your tightening not in place yet and with the progress against inflation, there’s still a lot of talk about very, very slow growth going forward in 2023. And the recession indicators are all suggesting that we are going to see recession this year. So I’m wondering if you’ve changed your view or you have a more nuanced view of what you think the danger to economic growth is going forward and whether you’re very close to perhaps tipping it into the wrong place, which calls for more restraint on your part.
Answer: So I do think you—most forecasts and, you know, my own assessment would be that that growth will continue—positive growth will continue but at a subdued pace as it did last year. We had growth of—GDP growth of 1 percent last year and also final sales growth, which we think is a better indicator, of about 1 percent. I think, you know, most forecasts and certainly my assessment would be that growth will continue at a fairly subdued level this year. There are other factors, though, that need to be considered. You will have seen that the global picture is improving a bit, and that will matter for us, potentially. The labor market remains very, very strong, and that’s job creation, that’s wages. As inflation does come down, sentiment will improve. You also—state and local governments are really flush these days with, you know, money, and many of them are considering tax cuts or even sending checks. So I think that’s going to support—they’re also spending a lot. There’s a lot of spending coming in the construction pipeline, both private and public. And so that’s going to support economic activity. So I think there’s a good chance that those factors will help support positive growth this year. And that’s my base case, is that there will be positive growth this year.