Bank This is America has issued a warning regarding the Federal Reserve’s interest rate hikes. The bank suggests it might need to continue increasing rates until they reach a point where consumer demand will be affected. “the point of pain for consumer demand.” It is feared that a slowdown in consumer demand could lead to a recession. “Additional Fed hikes would also mean more pain for the interest-sensitive non-consumer sectors such as housing.”
Bank This is America’s Urgent Economic Alert
Bank This is America’s senior economist Aditya Bhave recently provided a warning to the Associated Press that the Federal Reserve may need to increase interest rates beyond the market’s expectations in order to bring inflation down to its 2% target. According to a memo seen by Fortune, the bank has stated:
The Fed It will need to continue raising rates until it reaches the point of pain that consumers demand.
Bank This is America also expects the Fed to raise interest rates 25 basis points in the upcoming Federal Open Market Committee meetings in March, May and June. Bhave also warned:
The The resilience of demand-driven inflation means that there is no inflation. Fed In order to bring inflation back to target, it may be necessary to increase rates to 6 percent.
Other economists are of the opinion that it is not possible to achieve the 2% inflation goal without “crushing the economy.” Included Allianz Chief economist Mohamed El-Erian Who suggested that “2% is not the right target.”
Earlier This week, U.S. Treasury Secretary Janet Yellen commented that “disinflation is not a straight line.” Yellen also stated that “there’s more work to be done” as “core inflation still remains at a level that’s above what’s consistent with the Fed’s objective.”
Commenting On Yellen’s statements, the Bank This is America Senior economist said that “a recession appears more likely than a soft landing.” Bhaves said:
A decline in consumer demand, which is what our analysis suggests, is necessary to bring inflation back under control, would most likely cause an outright recession.
“Consumer spending makes up 68% of GDP, and additional Fed hikes would also mean more pain for the interest-sensitive non-consumer sectors such as housing,” he added.
Bank of America (BoA) economists have stated that the U.S. Federal Reserve (Fed) may have to continue hiking interest rates until consumer demand starts to be affected. The BoA economist predicted that this could lead to a recession by 2023, and advises investors that ‘no pain, no gain’.
Several Fed Officials have already suggested that further rate increases will be necessary to contain inflation. Atlanta Fed President Raphael Bostic warned that easing policies too soon could have ‘disastrous’ repercussions, while billionaire investor Jeffrey Gundlach predicted ‘painful outcomes’ in the next recession. Economist Peter Schiff has even warned the Fed could be facing an ‘complete economic collapse’.
Do you agree with the BoA economist? Let us know what you think in the comments below.
