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The Fed Is Done Talking About Recession, Meeting Minutes Show

The Federal Reserve is done talking about recession, notes from its recent meetings show.

The word “recession” doesn’t appear even once in the minutes from the central bank’s last three meetings, which took place between September and December.

In contrast, the term pops up more than a dozen times in reference to an upcoming economic downturn in the minutes from the preceding seven meetings, dating back to November 2022.

The Fed’s staff economists flagged the potential for a “recession” within the next year at both the November and December meetings in 2022, the minutes show. In March 2023, they projected “a mild recession starting later this year.”

Wall Street denizens surveyed by the Fed also rang the recession alarm repeatedly. “Desk survey respondents still saw a recession occurring in the near term as quite likely,” read the minutes from the June meeting last year.

They “continue to place significant probability of a recession occurring by the end of 2024,” the July minutes read.

The disappearance of the dreaded r-word from the Fed’s meeting notes underscores how much the economic outlook has brightened in recent months. The trouble began when inflation spiked to 40-year highs in the first half of 2022, spurring Fed chair Jerome Powell and his colleagues to raise interest rates from almost zero to over 5% by the following July.

Higher rates encourages saving instead of spending and makes borrowing more expensive, which helps to relieve upward pressure on prices. Yet they can also dampen consumer demand, deter corporate investment, drive up unemployment, pull down asset prices, and raise the risk of an economic slowdown or full-blown recession.

The speed and scale of the hikes fueled concern of a hard landing among both the Fed staff and financial professionals, the minutes show. However, inflation has cooled to below 4% in recent months, unemployment remains at a historic low of under 4%, and the economy grew by nearly 5% in the third quarter, paving the way for the Fed to stop raising rates and start cutting them instead.

The fading threat of inflation and high rates seems to have assuaged growth fears both inside the Fed and out, removing the word “recession” from the conversation for now.


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