Fed’s aggressive rate hikes raise likelihood of a recession

.....

AUTHOR

Choo Choo

CATEGORY

SUPPORT

Donate

Jerome Powell

“O come, let us worship and bow down: let us kneel before the LORD our maker.”  Psalms 95:6 (KJV) 

Federal Reserve Chair Jerome Powell has pledged to do whatever it takes to curb inflation, now raging at a four-decade high and defying the Fed’s efforts so far to tame it.

Increasingly, it seems, doing so might require the one painful thing the Fed has sought to avoid: A recession.

A worse-than-expected inflation report for May — consumer prices rocketed up 8.6% from a year earlier, the biggest jump since 1981 — helped spur the Fed to raise its benchmark interest rate by three-quarters of point Wednesday.

Not since 1994 has the central bank raised its key rate by that much all at once. And until Friday’s nasty inflation report, traders and economists had expected a rate hike of just half a percentage point Wednesday. What’s more, several more hikes are coming.

The “soft landing” the Fed has hoped to achieve — slowing inflation to its 2% goal without derailing the economy — is becoming both trickier and riskier than Powell had bargained for. Each rate hike means higher borrowing costs for consumers and businesses. And each time would-be borrowers find loan rates prohibitively expensive, the resulting drop in spending weakens confidence, job growth and overall economic vigor.

“There’s a path for us to get there,” Powell said Wednesday, referring to a soft landing. “It’s not getting easier. It’s getting more challenging”

It was always going to tough: The Fed hasn’t managed to engineer a soft landing since the mid-1990s. And Powell’s Fed, which was slow to recognize the depth of the inflation threat, is now having to play catch-up with an aggressive series of rate increases.

“They are telling you: ‘We will do whatever it takes to bring inflation to 2%,’ ” said Simona Mocuta, chief economist at State Street Global Advisors. “I hope the (inflation) data won’t require them to do whatever they’re willing to do. There will be a cost.”

In Mocuta’s view, the risk of a recession is now probably 50-50.

“It’s not like there’s no way you can avoid it,” she said. “But it’s going to be hard to avoid it.’’

The Fed itself acknowledges that higher rates will inflict some damage, though it doesn’t foresee a recession: On Wednesday, the Fed predicted that the economy will grow about 1.7% this year, a sharp dow…

God Bless America & God Bless You

SHOP

Made By Choo Choo

Shop

PRAYER & PROPHECY

Big Bear Bald Eagle Live Nest Cam

Avon Lake Eagle Cam 3

Sunday Morning Service 6/12/2022

COUNTDOWN TO CH00 CH00 NEWS 2 YEAR ANNIVERSARY

2 Year Anniversary
Choo Choo News
0
0
0
0
Days
0
0
Hrs
0
0
Min
0
0
Sec