In the wake of the COVID-19 pandemic, experts have been warning about a potential recession for more than a year. However, this recession risk might actually be waning.
Guy Williams, president of Gulf Coast Bank and Trust, joined WWL’s Newell Normand this week to explain.
“Are we headed to this soft landing that everybody hopes for?” Normand asked.
“We actually might be,” said Williams. “This is an unusual time, and I think it’s intriguing because the Federal Reserve, which never gets the forecast right, is now projecting that there may not be a recession.”
Last month, the Federal Reserve Bank raised interest rates yet again in an effort to tame inflation, which increased slightly in June.
“Recent indicators suggest that economic activity has been expanding at a moderate pace. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated,” said the bank in a statement. “The U.S. banking system is sound and resilient.
Tighter credit conditions for households and businesses are likely to weigh on economic activity, hiring, and inflation. The extent of these effects remains uncertain. The Committee remains highly attentive to inflation risks.”
Previously, the Fed predicted a recession in the fourth quarter of this year or the first quarter of next year, said Williams. He also noted that the bank underestimated economic output in the U.S.
“So, the economy is actually growing reasonably – well, grew, at 2.6% -- which is probably the best production in the developed world,” Williams explained. China’s numbers can’t really be relied upon. You know, they project they’re showing higher numbers. But, the reality is they’re probably growing less than we are.”
What does this mean for average Americans? That increased interest rates will keep credit card payments high and possibly that more people will return to work.
“People are coming off the sidelines and going back to work,” Williams said. “So... that’s a positive sign. The other thing is, you know, the lingering unemployed, the people that are staying on the unemployment rolls – it’s called continuous jobless claims – that’s going down.”
Normand and Williams also discussed the economic impact of Russia’s military strategies, Dutch gangs blowing up German ATMs, and how consumers will be affected by higher bank capital ratios. Listen to the full conversation here.
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