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The probability of a recession occurring in the US over the next year has fallen noticeably in recent months, the Federal Reserve noted in its latest monetary policy report to the US Congress.

Key takeaways from the statement

“US economy grew moderately last year, labor market strengthened further and inflation continued to run below target.”

“Downside risks to US outlook seem to have receded in late 2019 due to decrease in trade tensions, looser financial conditions and stabilizing global growth.”

“Global slowdown in manufacturing and trade appears to be nearing an end while consumer spending and services activities continue to hold up.”

“Possible economic spillovers from the coronavirus in China have presented a new risk to the US outlook.”

“Asset valuations and business debt are elevated; leverage in the financial sector appears low by historical norms.”

“Other near-term risks to the financial system include fragilities in corporate and financial sectors in China and uncertainties over new trade arrangements between the UK and European Union.”

“Money market conditions were quite calm on year-end after it added liquidity with repo operations.”

USD reaction

The US Dollar Index clings to its daily gains and was last up 0.12% on the day at 98.60.