The Fed's Dilemma: Inflation vs. Recession
As officials face increased criticism that their aggressive rate hikes will cause a recession, they are steadfast in their decision not to back down; inflation remains near 40-year highs.
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The Federal Reserve is set to continue its aggressive interest rate-hiking campaign in an effort to bring down inflation, though it acknowledges that this may cause a recession. policymakers are facing an uphill battle to fight spiking prices, but they believe that this is necessary in order to avoid an even worse economic outcome.
![Federal Reserve Board Chairman Jerome Powell looks on during a hearing before the Senate Banking, ... [+] Housing and Urban Affairs Committee.AFP via Getty Images](/uploaded_images/b1ab03cb5ac08d9d412c46731d86611a_1665600064.jpg)
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skyrocketing prices have forced central banks around the world to reverse pandemic-era policy measures meant to bolster markets—but stubborn inflation has economists worrying officials may fuel a recession while trying to cool the economy. already, the fed's rate hikes have seriously rattled the housing and stock markets. new home sales plunged to a six-year low this summer, and the s&p 500 has shed about 25% of its value this year—reversing nearly two years of gains. analysts warn the fallout will only get worse if the nation plunges into a recession.
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Comerica forecasts that the Fed will authorize another 75 basis point hike in November, followed by a half-point in December and a quarter-point in February. This would put the Fed funds target at a "very restrictive" range of 4.5%- to 4.75%.
"Chief Critic"
The UN's warning of a global recession is a wake-up call for central banks to change course on interest rates. With developing countries especially vulnerable to debt and default, it's crucial that monetary and fiscal policy loosen up in order to prevent a prolonged period of stagnation.
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It's no secret that the global economy is in a bit of trouble right now. With the U.S. in the midst of a recession and other countries around the world also struggling, it's clear that something needs to be done to turn things around.
There is a real danger of a global recession taking place in the near future, as interest rate hikes threaten to lead to $4 trillion in economic losses. This would be a devastating blow to the global economy, and could lead to widespread market instability and job losses.
