The Federal Reserve almost certainly will raise rates by 75 basis points in two months (0.75%). That will further increase the cost of loans, particularly in the housing market. Inflation will not be curtailed right away. That means it could remain near 10%. The combination is deadly to the economy.
Some economists believe the United States is already in a recession. Consumer confidence, as reported by several experts and research houses, has plunged. Layoffs have started to rise. Venture capital has cracked down on investments. Investors have backed off expectations for earnings. The stock market has virtually crashed.
Americans last saw what a recession looked like in 2007 through 2009. Unemployment topped 9% for several months. Some economists have argued the current recession will not be as bad because it was not caused by a global financial crisis. While this may be true, millions of Americans will feel the effects.
Recessions usually are characterized by industries that come close to collapse. This could happen in the hospitality segment, which already has been hit by the COVID-19 pandemic. The airline industry wants to add workers. This increase in expenses has started to work toward the jaws of a recession-driven drop in travel and a jump in jet fuel prices.
Since a recession triggered by inflation and rising interest rates has not been part of the American economy for decades, it is hard to see how this one will play out. However, because it already has started, that question will be answered quickly.
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