New York Federal Reserve President John Williams said yesterday that a U.S. recession is not likely, CNBC reported. In an interview, he said, “A recession is not my base case right now. 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.” 

William said he could foresee gross domestic product gains reduced to about 1 to 1.5 percent for the year, compared to the 5.7 percent increase in 2021 that was the fastest pace since 1984. 

“But that’s not a recession,” 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.” 

According to CNBC, the most commonly followed inflation indicator shows that prices increased by 8.6 percent from a year ago in May, the highest level since 1981. A measure the Fed prefers runs lower, but is still well above its 2 percent target. 

The Federal Reserve has enacted three interest rate increases this year totaling about 1.5 percentage points, and more may be on the way. 

Williams said it’s likely that the federal funds rate, which banks charge each other for overnight borrowing but which sets a benchmark for many consumer debt instruments, could rise to 3 to 3.5 percent from its current target range of 1.5-1.75 percent. 

Williams conceded that “we’re going to have lower growth, but still growth this year.” 

The Federal Reserve has also begun to shed some of the assets on its balance sheet— particularly Treasury bonds and mortgage-backed securities. The New York Fed is in the early stages of a program that eventually will see the central bank allow up to $95 billion in proceeds from maturing bonds roll off each month.