The U.S. economy retracted for the second quarter in a row, sparking concerns that the country is headed into a recession, the Bureau of Economic Analysis reported on Thursday.

According to new numbers from the bureau, real gross domestic product (GDP) decreased at an annual rate of 0.9% in the second quarter of 2022. This follows the 1.6% real GDP decrease in the first quarter.

This is concerning to many as two consecutive quarters of economic retraction is widely accepted as the normal indicator of a recession in the financial community. Despite this milestone, the Federal Reserve and the Biden administration were quick to state that the U.S. is indeed not in a recession, at least not yet.

In a statement on Thursday, President Joe Biden said that coming off of last year’s historic economic growth – and regaining all the private sector jobs lost during the pandemic crisis – it’s no surprise that the economy is slowing down as the Federal Reserve acts to bring down inflation. “Our job market remains historically strong, with unemployment at 3.6% and more than 1 million jobs created in the second quarter alone,” President Biden stated. “My economic plan is focused on bringing inflation down, without giving up all the economic gains we have made.”

Federal Reserve chair Jerome Powell echoed this sentiment in a press conference on Wednesday while announcing the fourth interest rate hike of the year as the central bank aims to tamp down sky-high inflation.

“My colleagues and I are strongly committed to bringing inflation back down, and we are moving expeditiously to do so,” Powell said on Wednesday. “We have both the tools we need and the resolve it will take to restore price stability on behalf of American families and businesses.”

The Fed raised interest rates by 0.75% on Wednesday, repeating the same hike seen in June. “The committee decided to raise the target range for the federal funds rate to 2-1/4 to 2-1/2% and anticipates that ongoing increases in the target range will be appropriate,” the Fed said in a statement.

Pressed further by journalists on Wednesday, Powell reiterated that the Fed’s interest rate hikes are necessary to stabilizing the economy. “We actually think we need a period of growth below potential, in order to create some slack so that the supply side can catch up,” Powell stressed. “We also think that there will be, in all likelihood, some softening in labor market conditions. And those are things that we expect, and we think that they’re probably necessary if we were to get inflation back down.”

This news comes as Senate Majority Leader Chuck Schumer, D-N.Y. and moderate Democratic Sen. Joe Manchin, D-W.V. reached a deal to introduce the Inflation Reduction Act of 2022 on Wednesday.

The historic legislation, if passed, will make a down payment on deficit reduction to curb inflation, invest in domestic energy production and manufacturing, and reduce carbon emissions by roughly 40% by 2030. The bill will also finally allow Medicare to negotiate for prescription drug prices and extend the expanded Affordable Care Act program for three years, through 2025.

“After many months of negotiations, we have finalized legislative text that will invest approximately $300 billion in deficit reduction and $369.75 billion in energy security and climate change programs over the next ten years,” the senators said in a joint statement on Wednesday. The investments will be fully paid for by closing tax loopholes on wealthy individuals and corporations.”

According to the legislation, the package would raise an estimated $739 billion in tax revenue, including $313 billion through a 15% corporate minimum tax and $124 billion through the IRS enforcement of a reformed tax code.

President Biden voiced his support on Wednesday, stating that the bill would reduce the deficit “beyond the record setting $1.7 trillion in deficit reduction” the administration has already achieved this year.

“This is the action the American people have been waiting for,” President Biden said. “This addresses the problems of today – high health care costs and overall inflation – as well as investments in our energy security for the future.”