As inflation continues to tighten its grip on Americans’ bank accounts, the Federal Reserve has made a number of aggressive moves to combat the situation, but analysts are sounding the alarm.
According to Fox Business, some economic experts believe that Fed’s recent rate hikes, including recently the first 75 basis point hike since 1994, could “break” the U.S. economy, as more rate hikes will undoubtedly be necessary to fight continued inflation woes.
Fed Chairman Jerome Powell confirmed to reporters shortly after announcing the record rate hike that yet another hike could be coming as soon as July.
Ryan Sweet, the head of monetary policy research at Moody’s Analytics, believes that while rate hikes are inevitable, and a necessary evil to catch up to runaway inflation, the risk of destructive damage to the U.S. economy remains a real threat.
“The Federal Reserve is going to hike interest rates until policymakers break inflation, but the risk is that they also break the economy,” Sweet said of the situation.
Sweet recently provided stats that show just how much extra the current inflation rate is costing American families on a yearly basis.
“Having inflation at 8.5% on a year-ago basis, compared with the 2.1% average growth in 2018 and 2019, is costing the average household $346.67 per month to purchase the same basket of goods and services as they did last year. However, the pure cost for households for having inflation running at 8.5% is $460.42 per month,” Sweet said.
At the current rate, that monthly total adds up to roughly $5,500 per year in extra costs.
Heading into the next several months, Sweet also explained that the U.S. will face one of two possible outcomes, both of them bad, but one worse than the other.
“The Fed could be faced with a Hobson’s choice: Push the economy into a mild recession, similar to our scenario, to tame inflation, or wait and cause a more significant recession, since a stagflation scenario is possible next year if the Fed isn’t aggressive enough,” Sweet said.
Stagflation fears are highest among investors since 2008, global profit expectations have fallen to the lowest also since 2008, and global growth optimism has sunk to a record low: Bank of America’s monthly fund manager survey https://t.co/3utUvNAhaY pic.twitter.com/tWqxw5Zg0T
— Lisa Abramowicz (@lisaabramowicz1) June 14, 2022
According to the New York Post, when President Joe Biden was asked what he thinks about economic experts now saying a recession is more likely than ever, the president scolded the reporter, snapping back with, “Not — the majority of them aren’t saying that. Come on, don’t make things up, okay?”