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Federal Reserve, war to inflation and recession risks
Giovanna Mossetti, Senior Economist Intesa Sanpaolo
25.07.2022
fruition time: 8 min

INSIGHTS - ECONOMIND

Federal Reserve, war to inflation and recession risks

Federal Reserve, war to inflation and recession risks

04:03

 

The United States is returning to the past, to the 1970s and early 1980s when inflation was scary. In June 2022 the price increase was 9.1% year-on-year, the highest level in forty-one years.

To counter the price run, the Federal Reserve has initiated, probably belatedly, an aggressive strategy of raising interest rates, at the risk of halting growth and driving the economy into recession. Current forecasts are for a sharp slowdown in growth, between 1.5% and 2% in 2023-24, and a return of inflation toward 2 percent, with a recession risk of 40 to 50 percent. However, credible and incisive action by the U.S. Central Bank, led by Jerome Powell (appointed by Donald Trump), may limit the depth and duration of any recession through possible rate cuts as early as 2024.

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