In an interview with Bloomberg TV, several US economists expressed the view that the Federal Reserve will ultimately have to push the US economy into recession to stop inflation. There is no other way to stop inflation.
“If we continue to see inflation data like [jene vom März] “The Federal Reserve will realize that it has no choice but to induce a recession if it wants to meet its 2 percent inflation target,” said Ian Lyngen, head of U.S. strategy at BMO Capital Markets.
On Thursday, the latest data showed that US inflation unexpectedly rose 3.5 percent year-on-year in March. Experts only expected 3.4 percent. Inflation was also higher than in January and February of this year.
Stock markets plunged around the world following the US inflation figures.
Manulife Financial chief economist Frances Donald also agrees with this assessment, Business Insider reports.
“Now that we are back in an area where previous rate cut projections look wrong, we need to reduce the likelihood of bad developments. [für die Börsen] elevator,” Donald said. “[Die US-Notenbank] You will have to keep the interest rate high until something [in der Wirtschaft] break. That is a problem.”
Interest rates affect the entire economy.
The US Federal Reserve periodically sets the so-called key interest rate for the US economy. Simply put, higher interest rates lead to more expensive loans. The more expensive the loans are, the fewer businesses and individuals borrow money. With less money, companies and individuals can also invest less money, making economic growth more difficult.
Currently, American citizens and businesses, to put it very simply, are spending too much money to lower prices. The greater the demand for products and services, the higher the prices that can be set.