Federal Reserve[1] Chairman Jerome Powell said Thursday that the U.S. should be able to steer clear of a recession, as it continues to extend the longest economic expansion on record.
“In principle, there’s no reason why it can’t last,” Powell told the House Budget Committee in testimony. “At the risk of jinxing this, I would say that in principle there’s no reason to think, that I can see, that the probability of a downturn is at all elevated.”
Powell said he does not see any parts of the economy that are “really hot,” referring to inflated asset valuations that could resemble the mortgage bubble that triggered the last financial crisis. He reiterated that the consumer, which represents about 70% of the economy, remains strong despite weakening manufacturing and exports.
Powell added that financial markets also do not appear to show signs of a “build-up of leverage,” despite concerns over leveraged loans and corporate debt[2]. Fed officials have flagged rising levels of poorly rated corporate debt as a possible risk to the financial system, but Powell said there is nothing “troubling from a financial stability stance.” His remarks preview a new report expected from the Fed on Friday that will provide updates on financial risks that could upend the economic recovery.
“I would say this expansion is on a sustainable footing and we don’t see the kind of warning signs that appear in other cycles yet,” Powell said on Thursday. “Of course you never really know but I would say...