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Businessman |  Fed boss: Risk of recession in the US due to rising interest rates

Businessman | Fed boss: Risk of recession in the US due to rising interest rates

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Rapid Federal Reserve rate hikes could send the U.S. economy into recession. Jerome Powell, president of the US Federal Reserve, acknowledged this during a hearing with members of the Senate.

AP

June 22, 2022

In the same conversation with members of Congress, Powell said a smooth landing for the economy after rate hikes was a “big challenge.” At the same time, according to the central banker, the probability of a recession in two consecutive quarters of the economic downturn is not exceptionally high. But “of course it is possible”.

Economists and financial leaders are increasingly taking the recession into account in the United States. Last week, the central bank raised interest rates by 0.75 per cent, the largest increase since 1994. The central bank has also raised interest rates twice before. The higher the interest rates the less money flows into the economy. It should control inflation, but also stifle economic growth.

Swelling

The former head of the New York Federal Reserve, among others, argues that a recession is now inevitable. Deutsche Bank CEO Christian Sewing told a conference that he was assessing the possibility of a 50 percent recession due to rising interest rates.

The central bank is now particularly keen on reducing inflation. In May, prices in the United States rose the fastest in more than 40 years. Powell admitted that he was surprised that the daily lives of Americans quickly became so expensive. “There may be more surprises to come,” he added.

Powell received criticism, especially from Republican senators, who accused the Fed of failing to protect Americans from losing their purchasing power. “The Federal Reserve has failed the American people,” said Alabama Senator Richard Shelby.

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