https://sputnikglobe.com/20221011/us-feds-dogged-rate-hikes-may-worsen-macroeconomic-situation-amid-looming-recession-expert-warns-1101726211.html
US Fed’s Dogged Rate Hikes May Worsen Macroeconomic Situation Amid Looming Recession, Expert Warns
US Fed’s Dogged Rate Hikes May Worsen Macroeconomic Situation Amid Looming Recession, Expert Warns
Sputnik International
The US Federal Reserve delivered another big rate hike in late September, raising interest rates by three-quarters of a percentage point for a third straight... 11.10.2022, Sputnik International
2022-10-11T14:15+0000
2022-10-11T14:15+0000
2022-10-11T14:21+0000
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Against the backdrop of soaring inflation, the recent spate of measures taken by the US Federal Reserve to tame the increase in the consumer price index (CPI) will actually worsen the macroeconomic situation in the US and across the global economy, Sergio Rossi, professor of macroeconomics and monetary economics at the University of Fribourg, Switzerland, warned.Much of the pressure on the CPI comes from the supply side on the market for produced goods and services, besides being fueled originally by major problems, such as the COVID-19 pandemic and the ensuing lockdowns and supply chain bottlenecks. More recently, the energy crisis across the global economy has further compounded the situation. The Fed’s repeated increases in the policy rates of interest will serve to reduce aggregate demand and further increase production costs, Sergio Rossi cautioned.The latter will particularly apply to firms that need to obtain a credit line to finance their economic activities, he added, saying he anticipated the US economic situation to worsen, while the global economy as a whole will also suffer a negative impact.Recession ‘Around the Corner’The US economy would be tipped into recession in six to nine months, JPMorgan's chief executive Jamie Dimon predicted in a CNBC interview at the JPM Techstars conference in London on October 10. Dimon mentioned that the Fed had “waited too long and did too little” as inflation jumped to four-decade highs.However, Professor Sergio Rossi disagreed with Dimon’s critique.‘Secular Stagnation’Weighing in on the advice by JPMorgan's chief executive to market participants to assess the likely outcomes of a recession, ranging from “very mild to quite hard,” Professor Sergio Rossi suggested that a kind of “secular stagnation” could be expected.The macroeconomics expert elaborated that this term applied to a very low rate of economic growth, coupled with a high unemployment rate and an even further increase in consumer prices. In other words, something close to stagflation could be expected, Rossi said.If, indeed, a recession is just around the corner, the Biden administration should direct public expenditure towards satisfying the needs of the US population, Rossi underscored. Low- and middle-class people should be receiving support from the administration, instead of public resources being funneled to prop up the Kiev regime.He concluded:"The future will be much more uncertain, and this will have a strongly negative impact on US firms."
https://sputnikglobe.com/20221011/us-economy-to-tip-into-recession-in-6-to-9-months-jpmorgan-ceo-warns-1101703089.html
https://sputnikglobe.com/20220912/us-capitalizing-on-eu-energy-crisis--recession-but-blowback-round-the-corner-experts-warn-1100694850.html
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us, economy, recession, inflation, us federal reserve, jamie dimon
US Fed’s Dogged Rate Hikes May Worsen Macroeconomic Situation Amid Looming Recession, Expert Warns
14:15 GMT 11.10.2022 (Updated: 14:21 GMT 11.10.2022) The US Federal Reserve delivered another big rate hike in late September, raising interest rates by three-quarters of a percentage point for a third straight time, with Chair Jerome Powell vowing to "keep at" the battle to beat down skyrocketing inflation.
Against the backdrop of
soaring inflation, the recent spate of measures taken by the US Federal Reserve to tame the increase in the consumer price index (CPI) will actually worsen the macroeconomic situation in the US and across the global economy,
Sergio Rossi, professor of macroeconomics and monetary economics at the University of Fribourg, Switzerland, warned.
Much of the pressure on the CPI comes from the supply side on the market for produced goods and services, besides being fueled originally by major problems, such as the COVID-19 pandemic and the ensuing lockdowns and supply chain bottlenecks.
More recently, the
energy crisis across the global economy has further compounded the situation. The Fed’s repeated increases in the policy rates of interest will serve to reduce aggregate demand and further increase production costs, Sergio Rossi cautioned.
The latter will particularly apply to firms that need to obtain a credit line to finance their economic activities, he added, saying he anticipated the US economic situation to worsen, while the global economy as a whole will also suffer a negative impact.
Recession ‘Around the Corner’
The US economy would be
tipped into recession in six to nine months, JPMorgan's chief executive Jamie Dimon predicted in a CNBC interview at the JPM Techstars conference in London on October 10. Dimon mentioned that the Fed had “waited too long and did too little” as inflation jumped to four-decade highs.
However, Professor Sergio Rossi disagreed with Dimon’s critique.
"The upward pressure on consumer prices cannot be addressed properly by a monetary policy intervention. In any case, the Fed did not increase its policy rates of interest in past years, as before 2022 the increases in the US consumer price index were not problematic for the US economy at large."
11 October 2022, 05:19 GMT
Weighing in on the advice by JPMorgan's chief executive to market participants to assess the likely outcomes of
a recession, ranging from “very mild to quite hard,” Professor Sergio Rossi suggested that a kind of “secular stagnation” could be expected.
The macroeconomics expert elaborated that this term applied to a very low rate of economic growth, coupled with a high unemployment rate and an even further increase in consumer prices. In other words, something close to stagflation could be expected, Rossi said.
"As a result, financial markets might be affected negatively, with the risk of a further systemic crisis such as the one that burst in 2008, after Lehman Brothers’ bankruptcy," he predicted.
If, indeed, a recession is just around the corner, the Biden administration should direct public expenditure towards satisfying the needs of the US population, Rossi underscored. Low- and middle-class people should be receiving support from the administration, instead of public resources being funneled
to prop up the Kiev regime.
"Unless such a policy change occurs, the US economy will enter into a prolonged recession, with a mushroom growth of unemployment and also a much higher number of under-employed workers. All this will spur social conflicts and is likely to induce a radical political change in the forthcoming midterms elections," Rossi warned.
"The future will be much more uncertain, and this will have a strongly negative impact on US firms."
12 September 2022, 18:00 GMT
