The Globe and Mail reports in its Thursday, Sept. 22, edition that economists are concerned the Federal Reserve's rapid rate hikes will cause more economic damage than necessary to tame inflation. An Associated Press dispatch to The Globe reports that Roosevelt Institute economist Mike Konczal notes the U.S. economy is already slowing and that wage increases are levelling off and by some measures even declining a bit. Surveys show that Americans expect inflation to ease significantly over the next five years. AP notes that inflation expectations can become self-fulfilling: If people expect inflation to ease, some will feel less pressure to accelerate their purchases.
The Fed's rapid rate hikes mirror steps that other major central banks are taking, contributing to concerns about a potential global recession. The European Central Bank last week raised its benchmark rate by three-quarters of a percentage point. The Bank of England, the Reserve Bank of Australia and the Bank of Canada have all carried out hefty rate increases of late.
In China growth is already suffering from the government's repeated COVID-19 lockdowns. If recession sweeps through most large economies, that could derail the U.S. economy, too.
© 2024 Canjex Publishing Ltd. All rights reserved.