Federal Reserve Chairman Jerome Powell doesn't think we should worry about a recession.
If history is any indication, we probably should worry about a recession.
During his press conference following the March FOMC meeting, Powell called the economy "strong overall" and dismissed growing concerns about a recession, saying, "We don't make that forecast."
Not everyone is convinced.
Concerns about a recession have increased over the past month with the outbreak of the trade war. The Atlanta Fed's GDPNow forecast plummeted from a 2.3% growth rate at the end of February to -2.8% in a matter of weeks. It currently stands at -1.8%.
And despite Powell's optimistic arguments, the Fed cut its growth forecast to 1.7% this year, 0.4 percentage points lower than projected in December. While this is far from a recession, it does indicate that central bankers are not as optimistic as Powell made it sound.
Still, the Fed chairman thinks the economy is going to be fine. Shouldn't that reassure us?
Well, maybe not.
A trip to the past
Let me go back to early 2007. It was starting to become difficult to ignore the cracks forming in the subprime mortgage market. Some analysts were beginning to warn that bigger problems could be on the horizon.
At the time, the U.S. economy was still enjoying the boom generated by the artificially low interest rates imposed by the Federal Reserve after the bursting of the dotcom bubble. The central bank cut interest rates to a record low of 1% in 2002. Credit was easy and money flowed, especially into residential real estate.