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Economist puts recession risk at 80%
LinkedIn News – 9/23/2022
There is an 80% chance the U.S. will fall into a recession, according to Johns Hopkins University’s Steve Hanke, who blames the Federal Reserve for “exploding” the money supply. The central bank’s failure to manage inflation by carefully reducing the amount of money it poured into the economy during the pandemic has seen supply slow too suddenly, says Hanke, who predicts a recession in 2023. His comments come as a September CNBC survey of economists, fund managers and strategists put the chance of the U.S. slipping in recession over the next year at 52%.
People discuss the current and former states of their 401(k) savings plans after the Dow Jones Industrial Average fell to its lowest level since November 2020 on Friday 9/23/2020
Federal Reserve raises interest rates by 0.75% for the third time in a row as it races to reduce inflation.
The Federal Reserve is increasing for the third time the rate of interest and this time is a giant increase compared to the past one that is expressing a sense of urgency to fight the stuborn high inflation surge and the persistence of recessive trends.
On Wednesday, September 21, 2022, the Federal Reserve announced the 3nd consecutive interest rate hike, raising its benchmark rate by 75 basis points, to a range of 3% to 3.25%. This decision to raise borrowing costs for all the financing from mortgages to credit card loans trying to harness the highest inflation known by the U.S. economy in four decades. This policy of gradual increase can establish a precedent that has not reach the level that the Fed is seeking to reach which will be the steepest rate hike since the early 1980s. Financiers and Policymakers predicted that a subsequent rate of 1.25% will take place this year and a quarter point for the year of 2023. In other words, there is not quick fix to these stubborn inflation that is born and rooted within sectors that are considered the most sensitive and national interest oriented one while they are controlled by foreign countries, in the first place Russia.
Other explanations were given by the Fed Chairman Jerome Powell who explained that labor market tight conditions necessitated keeping rates “restrictive for some time” to bring inflation back to the annual target of 2% of the bank, against 8.3% currently.
The other aspect to read between the lines is the recession that is already imploding within the labor market. In fact, several policymakers expect unemployment to reach 4.4% by the end of 2023, up from 3.7% currently, an increase large enough to implement for good a recession.
Major indexes ended lower, after veering wildly on Powell’s remarks, with the Dow Jones Industrial Average falling more than 500 points, or 1.7%.