Will the Fed’s War on Inflation Crater the Economy?


The Federal Reserve on Wednesday approved a third straight rate hike of seventy-five basis points and suggested it will continue raising rates well above current levels in a bid to tame blistering inflation, which has hit 40 percent. year high.

However, after a new one Politically Report that an aggressive stance on reversing high consumer prices could potentially push the country into recession.

During his press conference following Wednesday’s meeting, Fed Chair Jerome Powell stated that “the FOMC (Federal Open Market Committee) is firmly committed to bringing inflation down to 2 percent and we will stand by that until the job is done .”

Powell then conceded that a hard landing or a recession is certainly possible, especially if the central bank has to continue tightening aggressively. “No one knows if this process will lead to a recession or, if so, how deep that recession will be,” he said.

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As expected, there was growing resistance from some well-known economists.

“Today the Fed decided to risk mass unemployment in the fight against inflation,” said Janelle Jones, a former chief economist at President Joe Biden’s Department of Labor who is now with Service Employees International Union. wrote on twitter.

“Raising interest rates and pushing the economy towards recession will leave millions of workers out of work or face wage cuts,” she continued.

Liz Ann Sonders, chief investment strategist at Charles Schwab, also expressed concerns. “There’s an old saying that sometimes they tighten until something breaks. It’s a legitimate concern at this point,” she said Politicallyadding that the best-case scenario for the US economy now is a “rolling recession,” where different parts of the economy shrink at different times, but overall growth never really shrinks.

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“The Fed has now entered the ‘danger zone’ in terms of the rate shock it is inflicting on the US economy,” Peter Boockvar, Bleakley Financial Group’s chief investment officer, told CNN Business.

Mark Haefele, chief investment officer at UBS Global Wealth Management, told clients following the central bank’s announcement: “In our view, a 4% Fed policy rate is about the highest the economy could withstand and the Fed is clearly threatening it.” to raise interest rates above that level.”

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Meanwhile, other economists contend that some of the root causes of inflation are beyond the Fed’s control, such as persistent labor shortages and global supply chain problems. Approving further interest rate hikes would only hurt growth without providing any significant relief to inflation.

“We just don’t know if the Fed’s rate hikes will be successful,” said Nancy Davis, founder of hedge fund Quadratic Capital Management Politically.

Ethen Kim Lieser is a Washington-based financial and technical writer who has held positions at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.

Image: Reuters.





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