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Slow economic growth should be the base case and not recession, St. Louis Federal Reserve Bank President James Bullard said at an event in Minneapolis, adding that the central bank can still achieve a soft landing.
However, he accepted that recession risks remain. “It’d be a minor miracle if we could predict a recession six or nine months ahead of time,” he said during a fireside chat with Minneapolis Fed President Neel Kashkari. “Base case is slow growth, a somewhat softer labor market, and declining inflation. That would be the soft landing scenario.”
Bullard supports the Fed’s 25-basis point hike this week, which pushed its policy rate to 5.00%-5.25%, as expected. Policymakers had said they would will closely monitor economic data to determine “the extent to which additional policy firming may be appropriate to return inflation to 2%”.
As for the latest jobs report, Bullard said unemployment is lower now than it was a year ago. “But this is a very tight labor market, which will take time to cool off.”
When asked about recent developments in the banking sector, the Fed speaker played down risks in the space, saying these can be managed and regional banks will be “just fine”.
Regarding the Fed’s review of the Silicon Valley Bank (OTC:SIVBQ) collapse, Bullard said, “All the regulation in the world isn’t going to stop a company that doesn’t have the right risk management in place from getting hit by shocks.”
When asked about a possible central bank digital currency in the U.S., Bullard said this would require Congressional direction and support. “This is going to remain in the realm of debate in the near term.”
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