247 Local Media247 Local Media

    Subscribe to Updates

    Get the latest creative news from FooBar about art, design and business.

    What's Hot

    Few Common Issues That Occur While Transporting a Car

    February 3, 2023

    An Overview of Online Casinos vs Traditional Casinos

    December 8, 2022

    Types of Specialists for Erectile Dysfunction

    October 31, 2022
    Facebook Twitter Instagram
    • Home
    Facebook Twitter Instagram
    247 Local Media247 Local Media
    Subscribe
    • Home
    • Automotive
    • Business
    • CBD
    • Crypto
    • Education
    • Entertainment
    • Fashion
    • Finance
    • Health
    • Home Improvement
    • Law \ Legal
    • News
    • Shopping
    • Sports
    • Technology
    • Travel
    • Contact US
    247 Local Media247 Local Media
    Home»Business»US faces ‘L-shaped’ recession as Fed scrambles to tame inflation
    Business

    US faces ‘L-shaped’ recession as Fed scrambles to tame inflation

    By August 3, 2022No Comments3 Mins Read
    Facebook Twitter Pinterest LinkedIn Tumblr Email
    US faces ‘L-shaped’ recession as Fed scrambles to tame inflation
    Share
    Facebook Twitter LinkedIn Pinterest Email
    US faces ‘L-shaped’ recession as Fed scrambles to tame inflation

    [ad_1]

    The US economy will likely have to stay in recession for longer than anticipated in order to bring runaway inflation under control, according to a top analyst.

    Zoltan Pozsar, the global head of short-term interest rate strategy at Credit Suisse Group AG, wrote a client note pushing back on widespread sentiment that the worst of inflation may be behind us and that the Federal Reserve will begin lowering interest rates.

    Instead, the US may have to gird for a so-called “L-shaped” recession that will be deeper and longer than expected, according to Pozsar.

    Pozsar cited the ongoing Russian invasion in Ukraine as well as disruptions to the supply chain exacerbated by intermittent COVID-related lockdowns in China.

    Inflation has soared to levels not seen in four decades.
    Inflation has soared to levels not seen in four decades.
    Getty Images

    “War is inflationary,” Pozsar wrote. His note was earlier cited by Bloomberg.

    “Think of the economic war as a fight between the consumer-driven West, where the level of demand has been maximized, and the production-driven East, where the level of supply has been maximized to serve the needs of the West.” 

    Pozsar also cited restrictions on immigration and a decrease in mobility brought about by the pandemic as key factors that have resulted in a tight labor market.

    As a result, Pozsar writes that the Fed may need to raise interest rates to either 5% or 6% and keep them there for a sustained period of time in order to cool down consumer demand so that it matches the tight supply.

    Meanwhile, analysts at Goldman Sachs are warning investors against complacency while noting that the economy remains at high risk of falling into a recession.

    “Looking at the re-pricing of cyclical assets in the US and EU, we think the market might have been too complacent too soon in fading recession risks on expectations of a more accommodative monetary policy stance,” Goldman analysts wrote.

    The note was first reported by Insider.

    Goldman analysts think investors could be mistaken in their belief that the Fed will stop hiking interest rates — and perhaps start to cut them as soon as next year in hopes of avoiding a recession.

    Citigroup economists put the odds of a recession as high as 50%. Citi’s global chief economist, Nathan Sheets, said the current economic data constitute the Fed’s “worst nightmare.”

    The Fed is trying for a "soft landing" -- hiking interest rates while trying to avoid tipping the economy into a recession.
    The Fed is trying for a “soft landing” — hiking interest rates while trying to avoid tipping the economy into a recession.
    AFP via Getty Images

    Sheets said the Fed is in a bind as it tries to combat both stubborn inflation worldwide as well as slowing demand.

    “It’s really hard for central banks to fight that,” Sheets said. “I’m cautious to use the word, but it feels at the moment that we’re going through a period … [of] transitory stagflation.”

    “Looking at the re-pricing of cyclical assets in the US and EU, we think the market might have been too complacent too soon in fading recession risks on expectations of a more accommodative monetary policy stance.”

    Top economists such as Nouriel Roubini said the Fed must choose between tolerating high inflation and tipping the economy into a recession.

    Last week, the Fed hiked its benchmark interest rate by 75 basis points — the second straight month it had done so — and the first time since 1994 that the central bank raised rates by 0.75% two months in a row.

    The latest rate hike came two weeks after the federal government released data indicating that prices rose by 9.1% in June — the highest since November 1981.

    [ad_2]

    Source link

    Share. Facebook Twitter Pinterest LinkedIn Tumblr Email

    Related Posts

    Few Common Issues That Occur While Transporting a Car

    February 3, 2023

    Beyond Meat, Impossible struggle due to ‘woke’ perception: analysts

    September 26, 2022

    Developer hustles to build ‘Bustle’ in Penn Station area

    September 26, 2022
    Add A Comment

    Comments are closed.

    Editors Picks
    Recent Posts
    • Few Common Issues That Occur While Transporting a Car
    • An Overview of Online Casinos vs Traditional Casinos
    • Types of Specialists for Erectile Dysfunction
    • When students’ basic needs are met by community schools, learning can flourish
    • Walmart and Target Are Hiring 140,000 Seasonal Workers
    Archives
    • February 2023
    • December 2022
    • October 2022
    • September 2022
    • August 2022
    • July 2022
    • June 2022
    • September 2021
    Facebook Twitter Instagram Pinterest Vimeo YouTube
    • Home
    © 2022 - 247 Local Media- All Rights Reserved.

    Type above and press Enter to search. Press Esc to cancel.