Former Fed Official Says Odds of Recession ‘Very, Very High’ as Aggressive Moves To Tame Inflation Loom

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A former high-ranking official at the Federal Reserve said the likelihood of a recession in the United States is “very, very high,” though it might be a mild one that doesn’t hit until 2023.

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In an interview with CNBC, former Fed vice chair Roger Ferguson said that a recession is “almost inevitable.” His comments came ahead of the central bank’s expected announcement on May 4 that it will raise the benchmark interest rate by a half-percentage point.

“It’s a witch’s brew, and the probability of a recession I think is unfortunately very, very high,” Ferguson said, citing uncertainty about whether the Fed can tame inflation through a series of interest-rate hikes this year.

Ferguson added that he expects the recession to hit in 2023 and hopes it “will be a mild one.” He’s part of a growing chorus of economists to signal that the U.S. economy could be headed for a recession amid an environment of historically high inflation.

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As GOBankingRates previously reported, economists at Deutsche Bank recently sent a note to clients saying it would take a “deep recession” to meet the Fed’s goal of bringing inflation down to 2% from its most recent rate of 8.5% — the highest in 40 years. The theory here is that the central bank will have to raise rates so aggressively that the economy will be badly damaged in the process.

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There have been some worrying signs that U.S. economic growth is already slowing. A couple of them were included in a Monday report from the Institute for Supply Management (ISM).

The ISM Manufacturing Index for April decreased to 55.4 from 57.1 in March — a sign that while the sector is still growing, growth has slowed (any reading above 50 reflects expansion, and any reading below 50 reflects contraction). The ISM Employment Index for April stood at 50.9, which means hiring slowed to a near crawl.

Meanwhile, the U.S. GDP decreased at an annual rate of 1.4% in the first quarter of 2022, the Bureau of Economic Analysis (BEA) said last week. The reading was well below Dow Jones’ estimate for a 1% gain and also well below the previous quarter’s 6.9% increase.

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About the Author

Vance Cariaga is a London-based writer, editor and journalist who previously held staff positions at Investor’s Business Daily, The Charlotte Business Journal and The Charlotte Observer. His work also appeared in Charlotte Magazine, Street & Smith’s Sports Business Journal and Business North Carolina magazine. He holds a B.A. in English from Appalachian State University and studied journalism at the University of South Carolina. His reporting earned awards from the North Carolina Press Association, the Green Eyeshade Awards and AlterNet. In addition to journalism, he has worked in banking, accounting and restaurant management. A native of North Carolina who also writes fiction, Vance’s short story, “Saint Christopher,” placed second in the 2019 Writer’s Digest Short Short Story Competition. Two of his short stories appear in With One Eye on the Cows, an anthology published by Ad Hoc Fiction in 2019. His debut novel, Voodoo Hideaway, was published in 2021 by Atmosphere Press.
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