Warsh Says Economy Strong and Heading in Right Direction, Prediction Markets See Low Recession Odds

Prediction markets see no US recession this year, and Federal Reserve Chair Kevin Warsh said Wednesday that the economy is "strong" and heading in the right direction.

Warsh Sees Economy in Good Shape

At the FOMC press conference, Warsh said productivity has been "moving higher" over the past few years, though it is difficult to measure precisely.

"By and large, what I heard in the room over the last couple of days is consistent with my own view, which is that the economy is strong," he added. "The economy is heading in the right direction."

However, Warsh declined to tie economic growth to inflation, saying the Fed's goal is to build a more durable, longer-lasting economy while maintaining price stability.

No Economic Contraction Expected

Bettors on Polygon-based Polymarket see only a 7% probability of a recession this year, down sharply from a 37% year-to-date high in March. The probability of a recession in 2027 is significantly higher, at 35%.

For the outcome to be judged "yes," the economy must record two consecutive quarters of negative growth.

The first two quarters of 2026 saw economic growth, with the third-quarter GDP estimate due Friday.

Will the Fed Hike in December?

The Fed held rates at 3.75%-4%, despite two officials dissenting in favor of a hike. At the press conference, Warsh declined to commit to a December move.

The Fed chair said information received in the coming period will help the central bank "decide" where it wants to set policy.

However, market participants see a 78% probability of a hike to the 4.00%-4.25% range, according to the CME FedWatch tool.