Talk of a U.S. recession may be ‘premature’

The Dow Jones Industrial Average took a wild ride in August, prompting some politicians and analysts to talk about the possibility of a US recession. But one economist thinks that may be premature.

The Dow dropped 865 points over the first five days of the month, then, after a brief recovery, slid another 800 points in a single day the following week.

But Narayana Kocherlakota, a professor of economics at the University of Rochester, says the more important economic indicators look good. At the same time, he says there are some warning signs in the bond markets. His biggest concern, however, has to do with how the Federal Reserve would react in the unlikely event of a recession. As he explains, the Fed doesn’t have a lot of ammunition to offset a serious downturn in the economy.

Here, Kocherlakota explains his thinking and discusses the slow down in the stock market:

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