A recession is “inevitable” despite Biden’s claims to the contrary, former president of the Federal Reserve Bank of New York, Bill Dudley, outlined in Bloomberg on Wednesday.
VICTORIA JONES/POOL/AFP via GettyA recession is “inevitable” despite President Joe Biden’s claims to the contrary, former president of the Federal Reserve Bank of New York, Bill Dudley, outlined in Bloomberg on Wednesday.
“If you’re still holding out hope that the Federal Reserve will be able to engineer a soft landing in the US economy, abandon it,” DudleyDudley’s reasoning is broad. First, he pointed out the Fed will have to focus on tamping down inflation with interest rate hikes instead of growing the economy. Second, if the Fed fails to reduce inflation, soaring prices may continue, resulting in expectations that “would likely become unanchored, necessitating an even bigger recession later.
He also explained the “Fed has never tightened enough to push up the unemployment rate by 0.5 percentage point or more without triggering a recession.” Dudley continued, “[a]ccording to the Sahm rule, when this trigger is reached the next stop is a deeper slump, in which unemployment increases by at least 2 percentage points.”
Federal Reserve officials on Wednesday revealed new projections for the economy that reveal central bankers now expect the economy to grow less while inflation, unemployment, and interest rates to run higher than previously forecast.
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