Fed attempts to prevent recession are hampered by widespread uncertainty

Fed attempts to prevent recession are hampered by widespread uncertainty

Jerome Powell, the head of the Federal Reserve, has committed to use the data to determine how high interest rates should be raised in order to stop the greatest inflation spike in forty years.

However, Powell and other policymakers at the Fed are making that critical decision in light of data that, in recent months, has been so muddled and conflicting that it has been difficult for them to understand where the economy is actually at.

Although some economists predict that economic growth was negative in the second quarter of the year, hiring remains robust and the unemployment rate is close to historic lows. Despite their complaints about the economy and the sharp price increases, consumers claim to be still spending. Even while supply chains are getting better, manufacturing production is declining. And even as America completely resumes business, Covid instances are once again surging.

Therefore, Fed officials are preparing for another massive interest rate hike that will probably send the economy and markets into a tailspin without having a clear view of their intended aim. Because of this uncertainty, there is a greater chance that they will either act excessively, which might cause a catastrophic recession, or inadequately, which could prolong hot inflation and make it more difficult to control.

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