Just as it was above inflation. “The ‘inflation shock’ is getting worse, the ‘interest rate shock’ is just beginning, the ‘recession shock’ is coming,” Michael Hartnett, Bank of America’s chief investment strategist, said in a note to clients. “We expect a more aggressive tightening of monetary policy to push the economy into recession,” warn economists at Deutsche Bank. “Overheating in the labor market has significantly increased the risk of recession,” said Ian Hatzius, chief economist at Goldman Sachs. “The recession over the next two years is clearly more likely than not,” warns Clinton Treasury Secretary Larry Summers, whose prophetic inflation alarms went unnoticed by Biden a year ago. A worrying development: Short-term debt returns have outpaced long-term debt, signaling a lack of investor confidence in the economy along the way. Inflation rose to 8.5% in March. Joshua Roberts / REUTERS The key problem: The Fed’s attempt to tame inflation — now running at 8.5% per annum, the highest since 1981 — by raising interest rates and shrinking its balance sheet runs the risk of squeezing credit and hampering investment. and development. After months of claims (such as the White House) that inflation was “temporary”, the Fed is now tightening its grip, with expected interest rate hikes reaching a total of perhaps ½ 2 points before the end of the year. Add to these persistent issues in the pandemic supply chain, Russia’s invasion of Ukraine, President Joe Biden’s energy war and the Democrats’ tax and lending agenda – and the recession in a year or two. is starting to seem more and more likely.
Economist Tara Sinclair likens slowing price increases without slowing growth to “trying to land during an earthquake.” The Federal Reserve is expected to raise interest rates by up to 2.5 points before the end of the year. Richard Drew / APA Recruitment Sign Appears In A Restaurant In Schaumburg, Illinois.Nam Y. Huh / AP Indeed, Summers notes that there was never “a time in the United States when inflation was above 4[%] and unemployment was below 4[%]- as now – “and we have not had a recession in the next two years”. But the White House is very happy. Asked if Biden believed Summers was right about the recession, as it was about inflation, White House Jen Psaki said: “This is not a projection we have made.” And the director of the National Economic Council, Brian Deese, claims that the government “has led to a uniquely strong economic recovery” that “places us uniquely well to meet the challenges ahead.” Sorry: It was Bidenomics – the energy war, the spree of the nearly $ 2 trillion US Democrat bailout – that sparked Biden inflation. Now does the same treatment pretend to correct its catastrophic mistake, even if it remains the same? Prepare for a rocky road ahead.