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  • Writer's pictureBrady LaRoe

Recession worries increase as fed increases rates

Just this week the federal reserve announced a new increase in interest rates in an effort to combat continued high inflation. The new federal funds target rate has gone up by 0.75%, the third increase in interest rates in the past couple of months. This aggressive monetary policy is part of what Fed chair Jerome Powell sees as the central bank's sole goal of fighting inflation.

The news continued to push markets into bear market territory, almost completely erasing the gains from August and putting the market near the year's all time low in June. And as markets continue to go down, and high inflation rates persist, more and more people are worried about a possible recession happening.

According to CNBC’s most recent survey of economists, they found a 52% probability of a US recession in the next 12 months. The figure was even higher for Europe at 72%. Though there are differences in opinion between economists on how likely a recession is, and what it will look like.

Professor of applied economics at Johns Hopkins University Steve Hanke believes that the odds of a recession are higher - much higher. He believes that there is an 80% chance of a recession. CEO of Morgan Stanley James Gorman, on the other hand, argues that at this point it’s “50/50”. Some economists argue that we are already experiencing a recession. A recent study from the National Bureau of Economic Research found that 19% believe we are already in a recession.

A lot of this back in forth comes from the fact that determining a recession at this point is very difficult. While the technical definition of a recession, two consecutive quarters of GDP dropping, has been fulfilled, there are other metrics that don’t indicate everything is bad. Chief U.S. economist for Morgan Stanley Ellen Zentner states that factors like increasing numbers of jobs, a low unemployment rate, and the cushion from excess savings Americans have has kept the U.S. out of a recession.


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