President Donald Trump has tried to reassure markets about the risk of the US falling into a recession by saying the economy is doing “tremendously well”.
The US president said he did not see a recession – usually defined as when an economy shrinks for two consecutive quarters.
Larry Kudlow, White House economic adviser also said there was “no recession in sight”.
Last week, financial markets indicated a recession could be on the way. This is because it became cheaper for the US government to borrow for 10 years, rather than two.
This “inverted yield curve” often comes before a recession, or at least a significant slowdown in economic growth.His remarks came after Mr Kudlow had told Fox News Sunday that the US economy remained “in pretty good shape”.
“There is no recession in sight,” Mr Kudlow said. “Consumers are working. Their wages are rising. They are spending and they are saving.”
Markets around the world were rattled last week by the movement in the bond markets, which also knocked stock markets.
On Wednesday last week, US stock markets fell by about 3% when the yield curve inverted, although they had recovered lost ground by the end of the week.
Last month, the US Federal Reserve cut interest rates for the first time since 2008, and more cuts are expected. Janus Henderson’s Laura Foll told the BBC’s Today Programme that the US central bank was “responding to global events” such as the contraction in both the UK and German economies during the second quarter.
The US President has published about 40 tweets either criticising Fed chairman Jerome Powell or pushing for a rate cut.
“Of course, it is really hard to know how much of an effect Trump is having,” Ms Foll said.
“I don’t think you can rule out the extreme pressure the Fed is under from Trump, but it is really hard to know how much of a direct knock-on effect that is having on policy.”