New York Fed chair dismisses recession in US economy

ANKARA 

New York Federal Reserve President John Williams dismissed fears of a recession Tuesday and said the US economy is strong and he expects it to show growth, although at a slower pace in 2022.

"A recession is not my base case right now,” he told the CNBC network. “My own baseline projection is we do need to get into somewhat restrictive territory next year given the high inflation, the need to bring inflation down and really to achieve our goals."

The Fed has made rate hikes of 150 basis points in three meetings to lower record inflation that hit 8.6% in May -- its highest annual gain in more than 40 years.

Central bank officials in recent weeks have also signaled more rate hikes in coming meetings if inflationary pressures do not abate.

Williams said he expects the federal funds rate to reach 3% to 3.5% as a result of monetary tightening, which currently is in the 1.5% -1.75% target range.

The Fed's aggressive tightening cycle has created fears that it could push the American economy into a recession but Williams argued against that thinking.

"I think the economy is strong. Clearly, financial conditions have tightened and I'm expecting growth to slow this year quite a bit relative to what we had last year," he said.

"It’s a slowdown that we need to see in the economy to really reduce the inflationary pressures that we have and bring inflation down," he added.

Williams predicts that the US economy will expand 1% to 1.5% this year. The world's largest economy posted a growth rate of 5.7% in 2021.