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White House economic adviser Brian Diz has stopped denying the US recession because the Federal Reserve has tackled inflation, saying the central bank needs space to work.
Diz, director of the National Economic Council, said the move reflected President Joe Biden’s “highest priority” commitment to curb the biggest consumer price increase in four decades.
“We need to give the Fed space and freedom to do what it wants to do, to get inflation under control,” Deez told CNN’s “State of the Union” on Sunday. Asked if the United States was heading for a recession, he said: “There is always risk.
Consumers are facing the highest inflation in decades due to supply shortages caused by Russia’s invasion of Ukraine and expanding fiscal and monetary policy with rising food and energy costs. One price measure closely tracked by the Fed rose 6.6% for the 12 months ending March, while another measure, the consumer price index rose 8.3% for the year ending April, the highest reading in decades.
US central bankers say bringing prices back to their 2% inflation target is their top priority. They raised the benchmark lending rate by half a percentage point earlier this month after a quarter-point increase in March, and Chair Jerome Powell said the policy committee plans to raise it by half a point in the next few meetings. Powell added that there was a “good chance” that the Fed could bring inflation back to its 2% target without a “severe” recession or “materially high” unemployment.
According to a CBS News poll published on Sunday, Americans are becoming increasingly pessimistic about the economy, stock markets and inflation, with the proportion of those who say the economy is bad rising to 69% this month, 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.
Deez said the U.S. economy is in the throes of a further “stable and resilient growth”.
“While there is an absolute risk associated with inflation, and above all, this is important: the United States is in a better position than any other major economy to reduce inflation and meet this challenge without sacrificing all the economic gains we have made. And because of our recovery power, “Diz said on Fox News Sunday.”
The report on factory production and consumer purchases found that economic growth was strong at the beginning of the second quarter. Wages rose 428,000 last month, keeping the unemployment rate at 3.6%.
Financial markets set the minimum price at risk of slower growth, with the Standard & Poor’s 500 Index down 18% year on year. Futures markets expect the Fed policy rate to rise above 3% sometime next year.
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