Creating a recession is the Fed’s only way out of the cycle of interest rate increases, says top economist Steven Blitz. “There is no exit from this until he [Fed Chair Jerome Powell] does create a recession… That is when the Fed rates will stop being hiked,” said Blitz of Powell’s Tuesday Hill appearance, where Powell told lawmakers that the “ultimate level of interest rates is likely to be higher than previously anticipated.” There was a dramatic selloff in stocks following Powell’s comments, and economist Mohamed El-Erian says the risk of a recession or a stock market crash has dramatically increased. “The worst thing for policymakers to do is to dismiss Tuesday’s market volatility as noise… The more this undue volatility occurs, the greater the risk of economic and market accidents,” El-Erian added. As the Fed has signaled that higher interest rates are on the way, new data has been released showing that just 31% of Americans expect their financial situation to improve over the next year.
CNBC/Elliot Smith
No exit ramp for Fed’s Powell until he creates a recession, economist says
The U.S. Federal Reserve cannot disrupt its cycle of interest rate increases until the nation enters a recession, according to TS Lombard Chief U.S. Economist Steven Blitz.
“There is no exit from this until he [Fed Chair Jerome Powell] does create a recession, ’til unemployment goes up, and that is when the Fed rates will stop being hiked,” Blitz told CNBC’s “Squawk Box Europe” on Wednesday.
He stressed that the Fed lacks clarity on the ceiling of interest rate increases in the absence of such an economic slowdown.
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Business Insider/George Glover
The risk of a stock-market crash just shot up after Fed boss Powell signaled bigger rate hikes, Mohamed El-Erian says
Investors should be more wary about the risk of a recession or a crash in stock prices after Federal Reserve Chair Jerome Powell’s latest comments rattled markets, top economist Mohamed El-Erian has warned.
The chief economic adviser at Allianz noted the dramatic selloff in US stocks that followed Powell’s congressional testimony Tuesday. That shows the central bank had failed to properly signal its plan to keep interest rates higher for longer in a bid to tame inflation, he said.
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Fox Business/Megan Henney
Americans feeling most pessimistic about financial future since 2010, survey shows
Americans are feeling increasingly gloomy about their personal financial prospects over the next year as high inflation and rising interest rates squeeze consumers.
A new survey from Fannie Mae shows that just 31% of respondents expect their personal financial situation to improve over the next year, the lowest reading in a series that first began in 2010. At the same time, just 28% of Americans believe the economy is on the right track, according to the survey.
The decline in sentiment comes as the Federal Reserve signals that interest rates may need to climb higher than previously projected as a result of underlying inflationary pressures within the economy.
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