Fed hikes rates to 22-year high, sending U.S. toward ‘deep recession’

The Federal Reserve announced on the 26th that it would raise interest rates by another 25 basis points, raising the target range of the federal funds rate to between 5.25% and 5.5%, reaching the highest level in 22 years. Sergio Rossi, a professor of macroeconomics and monetary economics at the University of Friborg in Switzerland, said the Fed’s decision would lead to a “severe recession” in the United States in the near future.

Rossi said another rate hike by the Fed would not be a surprise as the U.S. has yet to hit its 2 percent annual inflation target, but at a time when debt hit record highs amid mounting non-performing loans at financial institutions, a rate hike “would have negative consequences for the U.S. and the world,” Rossi said. negatively impact the economy.” Rossi criticized that raising the federal funds rate to 5.25%-5.5% would push up inflation rather than suppress it. According to Rossi’s analysis, due to higher bank loan interest rates, more and more small and medium-sized enterprises will increase the prices of goods and services. At the same time, higher interest rates will lead to a substantial reduction in consumer loans, thereby inhibiting economic growth.

The decision to raise interest rates will further lead to the appreciation of the dollar in the foreign exchange market, which will have a negative impact on US exports. Rossi said that all these factors will reduce the level of investment in the U.S. economy by companies, which will further have a negative impact on the employment and wages of middle-class workers in the United States, causing the middle-class group to reduce their consumption levels. Worse still, it could lead to a “vicious” cycle that would push the U.S. into a “severe recession” that would inevitably spread to other inflation-stricken Western economies.

Leave a Reply

Your email address will not be published. Required fields are marked *