New York
CNN
—
Former Chairman of the Federal Reserve Alan Greenspan believes that a recession in the US is the “most likely outcome” of the Fed’s aggressive rate hike regime aimed at curbing inflation. He joins a growing chorus of economists predicting an imminent economic downturn.
His opinions are especially important. Not only did Greenspan serve five terms as Fed chair under four different presidents between 1987 and 2006, he was also the last chair to do so successfully. soft landingIn 1994. In the 12 months after February 1994, Greenspan nearly doubled interest rates to 6% and managed to stabilize the economy, avoiding recession.
Greenspan, now 96, said in a note this week that he doubts this current run will result in a repeat performance.
Data from the past two months showed prices starting to slow — good news, but not good enough, he said. “I don’t think this is going to warrant significant enough changes from the Fed to avoid at least a moderate recession,” Greenspan, now chief economic adviser at Advisors Capital Management, said in a statement posted on the company’s website Tuesday.
Fed increased interest rates Seven times last year, banks raised their overnight lending rate to a range of 4.25-4.5%, the highest since 2007. monetary policy meeting.
Greenspan said wage growth and, by extension, employment “still need to moderate for the decline in inflation to be temporary.” “So we may have a brief period of calm on the inflation front, but I think it will be too little too late.” Unemployment rates remain near historic lows at 3.7% in November. New employment data will be released on Friday morning.
Greenspan doubts the Fed will cut interest rates anytime soon because “inflation could flare up again and we’ll be back to square one,” Greenspan said. “Furthermore, it could undermine the Federal Reserve’s credibility as a purveyor of stable prices, especially if it was done simply to protect the stock market rather than in response to truly unstable financial conditions.”
He sees good news for investors on the horizon. According to him, the markets in 2023 will not be as chaotic as last year. “I believe 2022 will be a difficult year in terms of market volatility,” he said.
