President Joe Biden says he's confident a US recession isn't inevitable, but inflation is soaring, the Federal Reserve is about to deliver a set of rate hikes at a rapid pace, and ordinary Americans are worried.
Biden told The Associated Press that the US economy wouldn't fall into a recession even as growth slows.
He said that it wasn't inevitable. We are in a better position than any nation in the world to deal with inflation.
In May, inflation in the US grew at its fastest pace in 41 years. As Western sanctions on Russian energy widen the gap between global demand and supply, fuel costs are the main reason for the rise in consumer prices. The cost of food and housing is going up.
The benchmark interest rate was raised this week by the Federal Reserve. This was the largest single rate hike since 1994 and more are on the horizon as Fed officials suggest rates may need to rise to about 3.8% in 3 years.
A number of high-profile economists and investors have sounded the alarm on an impending recession despite the Fed's efforts. According to economists at Wells Fargo, the steep rate hikes will raise borrowing costs across the economy and will likely lead to amild-recession in mid-2023.
Morgan Stanley's chief strategist, Mike Wilson, said that the risk of a recession has been increased with the implementation of higher rates.
The stock market is likely to be chaotic if the Fed delivers a soft landing. He predicted that the S&P 500 will fall 10% from its current level to as low as 3,400 points, and that the Nasdaq 100 will follow suit.
The stock market where millions of ordinary people invest is on track for its worst week of losses since March 2020. It tipped into a bear market earlier this week after losing more than 20% in value from a record high.
The mood is clear for the time being. Richard Hunter, head of markets at Interactive Investor, said that investors are questioning whether any global growth is possible despite the current monetary shackles.
High gas, food, and home prices are hurting Americans' pocketbooks. According to the American Automobile Association, the current average national gas price is more than $5 per gallon, making it the highest price in history.
Consumer confidence fell to an all-time low in June. Millions of Americans are concerned about the economic downturn. This week, more people in the US have been looking at the word "recession" than at any point since 2004.
The likelihood of a US recession has doubled according to Bank of America. There's a 40% chance of a recession next year. The Fed fell far behind the curve and are now playing a dangerous game of catch up. According to the bank's economists, they expect GDP growth to slow to almost zero, inflation to settle at 3% and the Fed to hike rates above 4%.
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