InvestorQ : Is it true that the rate hikes in the US could lead to a recession or negative growth in the US economy?
Tisha Malhotra made post

Is it true that the rate hikes in the US could lead to a recession or negative growth in the US economy?

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Aashna Tripathi answered.
1 week ago
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Larry Summers, the former US Treasury Secretary, outlines the problem for the US economy. Its problems arise from too high inflation and too low unemployment. Yes, that is bad and it is signalling recession. That is more because wages are rising 6.6% in the US now. So, rate hikes may not bring down prices to the extent envisaged, but instead may cause a slowdown in growth and eventually a recession. Demand will continue to rise as consumer wages are going up. However, supply will not increase as supply needs lower rates.

The statistics are quite interesting. In last 100 years, inflation above 4% and unemployment below 5% caused recession on 90% of the occasions within 2 years. The interest rate hike will only exacerbate the recession and hasten it. Unless there is a major economic, political or social shock, US Fed appears to be in no mood to loosen as they are talking about adding another 200 bps by year end. Recession is a distinct possibility in the US.

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