Businessman | Fed boss: Risk of recession in US due to interest rate hike

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AP

June 22, 2022

In the same conversation with members of Congress, Powell said a soft landing for the economy after rate hikes is a “big challenge.” At the same time, according to the central banker, the probability of a recession occurring after two consecutive quarters of economic contraction is not exceptionally high. But “it’s certainly possible”.

Economists and financial leaders are increasingly taking into account the recession in the United States. Last week, the central bank raised interest rates by 0.75 percent, the largest increase since 1994. The central bank had also raised interest rates twice before. Higher interest rates mean less money flows into the economy. This should control inflation, but may inhibit economic growth.

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The former president of the New York Federal Reserve, among others, argues that a recession is now inevitable. Deutsche Bank CEO Christian Tywing told a conference that he estimates the chance of a recession due to interest rate hikes at 50 percent.

The central bank is now particularly interested in reducing the rampant inflation. In May, prices in the US rose at their fastest pace in more than 40 years. Powell admitted that he was surprised that everyday life had become so expensive for Americans so quickly. “There may be more surprises to come,” he added.

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