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The heads of Federal Reserve banks noted that the longest U.S. expansion on record could still fall victim to outside shocks, such as this week’s dramatic escalation of tensions between the United States and Iran.Brendan McDermid/Reuters

Top U.S. Federal Reserve officials struck upbeat tones about the economy on Friday, a confidence reflected in a record of their latest meeting that signaled no urgency to offer additional stimulus in the wake of three interest rate cuts last year.

In a blitz of appearances to kick off the new year, the heads of several regional Fed banks pointed to a strong job market, robust consumer spending and optimism for a resolution to the trade tensions that had nicked growth in the second half of 2019.

But they also noted the longest U.S. expansion on record could still fall victim to outside shocks, such as this week’s dramatic escalation of tensions between the United States and Iran.

“The economy is still healthy. I’m encouraged by recent jobs reports and the pace of holiday spending,” with last year’s round of three Fed rate cuts helping prop up demand for homes, cars and other big-ticket consumer items, Richmond Fed President Thomas Barkin said.

That assessment was shared by Chicago Fed President Charles Evans. In a CNBC interview, Evans predicted U.S. economic growth this year would chug along at a rate of 2% to 2.25%, roughly the pace of expansion in the second half of last year.

The heads of the Cleveland and Dallas Fed banks sounded equally sanguine about the outlook. Together, their comments are the latest indication that Fed policymakers are uniformly satisfied the three rate cuts they delivered in 2019 should provide a sufficient buffer against the clutch of risks that spurred them into providing stimulus.

Indeed, after a fractious year for the Fed, which saw split votes on each of the rate cuts, officials agreed unanimously in their final policy meeting of 2019 to leave rates unchanged. Moreover, they agreed rates were likely to stay on hold for “a time” as long as the economy remains on track, minutes of the Dec. 10-11 meeting released on Friday showed.

“Participants judged that it would be appropriate to maintain the target range for the federal funds rate,” according to the minutes.

The December meeting signaled an end to a mini-easing cycle beginning in July that brought the Fed’s benchmark overnight lending rate down by three quarters of a percentage point to a range of 1.50-1.75%. Policymaker projections released at that meeting forecast no change to the rate this year.


But on a day when global oil prices spiked and stock markets fell after a U.S. air strike in Iraq that killed a top Iranian military figure, Barkin for one noted that recent recessions have been triggered by unexpected shocks - an economic “heart attack” as he termed it - that came amid the same sort of continued growth and low unemployment the United States is experiencing now.

“There’s always the possibility of a ‘heart attack,’ or shock, perhaps caused by global risks. Given yesterday’s news, imagine an escalation with Iran or, separately, a collapse in international economies,” Barkin said in a speech to the Maryland Bankers Association in Baltimore.

Highlighting those risks, oil prices shot 3% higher on the Iran developments, although the diminishing reliance on imported oil thanks to the U.S. shale boom means the potential hit to the economy is more limited than in the past, Dallas Fed President Robert Kaplan said.

“These events in the Middle East will have an effect but it’s going to be more muted than we might have seen historically,” Kaplan said in an interview with CNBC.

The Fed through much of last year noted that uncertainty around global trade policy and events like Britain’s pending departure from the European Union were holding down business investment and posed perhaps the key risk to the U.S. recovery.

Indeed, a key manufacturing sector survey out on Friday showed U.S. factory activity contracted by the most in more than a decade last month, although the recent Phase 1 trade deal between the United States and China may help limit further downside.

Barkin, too, said he was “hopeful” about recent progress in U.S.-China trade talks and signs that Brexit may pass without a major economic disruption.

“Recession isn’t inevitable” absent some shock, he said, “along many dimensions the economy looks quite healthy.”

Still, risks remain, with companies yet to have a fully clear idea about the global trade environment that is emerging.

“Add political polarization and regulatory uncertainty to the mix and it’s tough for businesses to feel like they’re on solid ground ... I don’t discount the idea that we could talk ourselves into a recession, particularly if the uncertainty begins to affect consumer confidence and spending,” Barkin said. “In my view, the biggest boost to our economy would come from lessening the uncertainty and lowering the volume.”