Agency, July 14. The US economy is headed for recession. Inflation in the US has reached a 41-year high. Because of this, by the end of this month, the Federal Reserve Bank may increase the interest rate by 100 basis points or 1 percent. The U.S. consumer price index rose 9.1 percent in June from 8 percent a year ago, data showed, as energy, food and housing became more expensive.
Rising inflation has raised concerns. Along with this, it is estimated that the Federal Open Market Committee (FOMC) may increase the rate by 100 basis points compared to the earlier estimate of 75 basis points. About 90% of the US CPI components saw an increase of more than 3%, according to the CPI inflation figures, AMP chief economist Shane Oliver told Reuters.
The Fed Watch tool on the Chicago Mercantile Exchange (CME) indicated a 78% chance of a 100 basis point hike. However, the Treasury will exit the yield curve. However, the dollar has also bounced in the meantime, sending the euro down against the greenback for the first time in two decades.
The US had expected low-interest rates in two years. increased by 3.121%. That was below the four-week high of 1.9558%. This widened the gap with the 10-year yield from the long-term benchmark. An inverted yield curve in which the yield on long-term bonds is lower than on short-term bonds. Experts have said that it indicates an economic recession.
A fall in the yield of long-term debt below the yield of short-term debt of the same credit quality is called an inverted yield curve. An inverse result is also known as a negative curve. It has previously proven to be a relatively reliable predictor of recession.
America is the world’s largest economy and most of the world’s countries are connected to it. Even in 2008, the recession started in America. Then the whole world fell under its grip. However, its influence in India was very low at that time. These people have expressed great concern due to the fear of a recession in the United States in the coming days.
Lawrence Summers, who held the position of US Finance Minister from 1999-2001, has said that there may be a recession in the US economy in the next two years. According to Summers, the world’s major economies have been affected by recession when inflation is above 4 percent and the unemployment rate is below 4 percent. America has passed both these criteria.
Adena Friedman, CEO of LBC, one of the world’s largest stock exchanges, warned on a panel at the World Economic Forum that recession forecasts could be the biggest cause of the recession. Predictions can undermine customer confidence. While it causes instability in the market, it increases the risk of recession.
Lloyd Blankfein, senior president of financial services at Goldman Sachs, said in a CBS interview that the risk of recession is high. But the Federal Reserve can stop it if it wants to. According to the information given by Goldman Sachs CEO David Solomon to CNBC, there may be a recession in the next 12 to 14 months. According to them, the probability of a recession is 30 percent.
According to Elon Musk, CEO of Tesla and SpaceX, the richest man in the world, America is already going through a recession. If the allocation of capital is wrong, the situation may worsen in the future, he said.
According to Bill Gates, the co-founder of Microsoft, inflation has increased due to the Russia-Ukraine war. Because of this, most countries have increased their interest rates. As the economy slows down due to the increase in interest rates, it turns into an economic recession. The American economy is heading towards a recession. Inflation in the US has reached a 41-year high. Because of this, the Federal Reserve Bank may increase the interest rate by 100 basis points or 1 percent by the end of this month. The U.S. consumer price index rose 9.1 percent in June from 8 percent a year ago, data showed, as energy, food, and housing became more expensive.