Senator Warren worries that Fed will tip U.S. economy into recession

[Auburn85 434]

https://www.reuters.com/markets/us/senator-warren-worries-that-fed-will-tip-us-economy-into-recession-2022-08-28/

 

 

Quote

 

WASHINGTON, Aug 28 (Reuters) - Democratic U.S. Senator Elizabeth Warren said on Sunday that she was very worried that the Federal Reserve was going to tip the nation's economy into recession and that interest rate hikes would put people out of work.

"Do you know what's worse than high prices and a strong economy? It's high prices and millions of people out of work. I am very worried that the Fed is going to tip this economy into recession," Warren told CNN on Sunday.

The U.S. central bank's chief, Jerome Powell, warned on Friday that Americans were headed for a painful period of slow economic growth and possibly rising joblessness as the Federal Reserve raises interest rates to fight high inflation. read more

Powell said in a speech on Friday the Fed will raise rates as high as needed, and would keep them there "for some time" to bring down inflation that is running at more than three times the Fed's 2% goal.

"While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses. These are the unfortunate costs of reducing inflation. But a failure to restore price stability would mean far greater pain," Powell had said in his speech.

"What he calls 'some pain' means putting people out of work, shutting down small business because the cost of money goes up because the interest rates go up," said Warren, whose views on the economy are often influential among progressive Democrats.

Warren said inflation was high partly due to supply chain problems, the COVID-19 pandemic and the war between Russia and Ukraine.

"There is nothing in raising the interest rates, nothing in Jerome Powell's tool bag, that deals directly with those and he has admitted as much in congressional hearings," Warren said.

Reporting by Kanishka Singh in Washington; Editing by Lisa Shumaker and Alistair Bell

 

 

[autigeremt 6,786]

She's on it with her strategy. Blame it on them, take little responsibility and spend this country into oblivion. 

[icanthearyou 4,464]

44 minutes ago, autigeremt said:

She's on it with her strategy. Blame it on them, take little responsibility and spend this country into oblivion. 

Spending would contribute to inflation, not recession.  At one time, the middle class would often spend us out of recession.  I don't think they have that kind of savings anymore (one of the problems with a dramatically unequal society). 

I fear she is correct because,,, the first hit for higher rates will likely be the construction market.  Construction is tied to several other components of GDP.   A sudden, dramatic jolt might not be easy to contain.

I think recession is the greatest danger, not inflation.  Apparently the Fed feels differently.  I get their confidence with the current employment level.  However, I still believe they(Fed) are biased toward protecting finance rather than the real economy (again, a problem with wealth concentration).

[autigeremt 6,786]

2 hours ago, icanthearyou said:

Spending would contribute to inflation, not recession.  At one time, the middle class would often spend us out of recession.  I don't think they have that kind of savings anymore (one of the problems with a dramatically unequal society). 

I fear she is correct because,,, the first hit for higher rates will likely be the construction market.  Construction is tied to several other components of GDP.   A sudden, dramatic jolt might not be easy to contain.

I think recession is the greatest danger, not inflation.  Apparently the Fed feels differently.  I get their confidence with the current employment level.  However, I still believe they(Fed) are biased toward protecting finance rather than the real economy (again, a problem with wealth concentration).

Definitely connected. Rising costs cause a domino effect. The middle class is shrinking so you are right….we can’t spend ourselves out of this anymore. 

[Didba 5,294]

So correct me if I’m wrong but I thought unemployment was at an all time low right now? I’m not sure how that factors in but it just struck me as strange with what this article is purporting. 

[autigeremt 6,786]

35 minutes ago, Didba said:

So correct me if I’m wrong but I thought unemployment was at an all time low right now? I’m not sure how that factors in but it just struck me as strange with what this article is purporting. 

So many people out of the workforce it’s hard to say what the actual unemployment numbers are. 

[icanthearyou 4,464]

31 minutes ago, autigeremt said:

So many people out of the workforce it’s hard to say what the actual unemployment numbers are. 

Yep.  As a metric it is nothing more the a current indicator.

[auburn41 492]

Well since the definition of a recession is two consecutive quarters of negative GDP, I don't fear she is right at all.  We are already in a recession!

[Didba 5,294]

12 hours ago, autigeremt said:

So many people out of the workforce it’s hard to say what the actual unemployment numbers are. 

Ah that makes sense.