MNI BRIEF: Fed's Barkin: Any Recession Likely Less Severe

The U.S. economy will slow further as the Fed's rate hikes start to hit, banks pull back lending and fiscal supports wane, but any recession will likely be mild, Federal Reserve Bank of Richmond President Thomas Barkin said Thursday.

"As I talk to firms, I hear reasons to believe that — if a recession were to occur this time — it might be less severe," he said in remarks prepared for the Montgomery County Chamber of Commerce in Blacksburg, Virginia. More white collar workers are likely to be laid off than front-line workers, and a number of potential home and car buyers are waiting for prices to fall. Businesses have also been planning for a recession for months now and that could help cushion any pullback.

"A recession hasn’t happened, even though the Fed has raised rates 525 basis points over the last 17 months in an effort to fight inflation, which is now in the 4% range," he said. "So, why haven’t we seen a recession? I think it’s because the pandemic is still with us — not the public health crisis, thankfully, but the economic dislocation it unleashed."