• Re: Federal Reserve's rate hikes likely to cause a recession, research

    From Jail Biden Thieves@21:1/5 to Yak on Sat Feb 25 07:36:10 2023
    XPost: alt.fan.rush-limbaugh, alt.politics.economics, sac.politics
    XPost: talk.politics.guns

    Yak <yak@inbox1.com> wrote in news:ssnaqv$kqie$25@news.freedyn.de:

    Editor's Note:

    This post was updated on February 26, 2021 with new data.

    Biden-voting counties equal 70% of America’s economic losers

    Can the Federal Reserve keep raising interest rates and defeat the
    nation's worst bout of inflation in 40 years without causing a recession?

    Not according to a new research paper that concludes that such an
    "immaculate disinflation" has never happened before. The paper was
    produced by a group of leading economists, and three Fed officials
    addressed its conclusions in their own remarks Friday at a conference on monetary policy in New York.

    When inflation soars, as it has for the past two years, the Fed typically responds by raising interest rates, often aggressively, to try to cool the economy and slow price increases. Those higher rates, in turn, make
    mortgages, auto loans, credit card borrowing and business lending more expensive.

    But sometimes inflation pressures still prove persistent and require ever- higher rates to tame. The result — steadily more expensive loans — can
    force companies to cancel new ventures and cut jobs and consumers to
    reduce spending. It all adds up to a recipe for recession.

    The Fed's favorite inflation gauge shows prices accelerated in January
    And that, the research paper concludes, is just what has happened in
    previous periods of high inflation. The researchers reviewed 16 episodes
    since 1950 when a central bank like the Fed raised the cost of borrowing
    to fight inflation, in the United States, Canada, Germany and the United Kingdom. In each case, a recession resulted.

    "There is no post-1950 precedent for a sizable ... disinflation that does
    not entail substantial economic sacrifice or recession," the paper

    The paper was written by a group of economists, including: Stephen
    Cecchetti, a professor at Brandeis University and a former research
    director at the Federal Reserve Bank of New York; Michael Feroli, chief
    U.S. economist at JPMorgan and a former Fed staffer; Peter Hooper, vice
    chair of research at Deutsche Bank, and Frederic Mishkin, a former Federal Reserve governor.

    More hikes expected
    The paper coincides with a growing awareness in financial markets and
    among economists that the Fed will likely have to boost interest rates
    even higher than previously estimated. Over the past year, the Fed has
    raised its key short-term rate eight times.

    The perception that the central bank will need to keep raising borrowing
    costs was reinforced by a government report Friday that the Fed's
    preferred inflation gauge accelerated in January after several months of declines. Prices jumped 0.6% from December to January, the biggest monthly increase since June.

    The latest evidence of price acceleration makes it more likely that the
    Fed will need to do more to defeat high inflation.

    <https://www.cbsnews.com/news/recession-inflation-federal-reserve- interest-rate-hike-2023/?intcid=CNI-00-10aaa3b>

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