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Is Recession inevitable? - What do economists think?


Welcome back readers and a warm welcome to our new subscribers. Our article today provides some insight on what economists think of the position that the United States Federal Reserve.

Federal Reserve

  • A plan is in motion to prevent a recession as interest rates increase. Federal Reserve Chairman Jerome Powell's announcement of a series of interest rate hikes is straight out of the central bank's 1994 playbook. A strategy saw the Fed tempering the US economy and executing a successful soft-landing. 

Soft-Landing: A terminology economists use to describe the manipulation of interest rates proactively sufficient to stop the economy from overheating and experiencing high inflation.  

  • The former titan Alan Greenspan, 1994 Federal Reserve Chairman, had much success controlling a chaotic economy. The year 1994 saw the economy booming with rapid inflation on the loose. Mr Greenspan, in seven interest rate hikes, pushed the rates to 6%, two half-point increases and one three-quarter hike. 
  • Economists agree that an interest rate hike is warranted to reduce economic demand and combat price fluctuations. However, on a bigger scale, the consequences for the economy are unfavourable. Historical evidence of rate hikes supports an economic downturn, but instances where a soft landing is somewhat rare. 
  • Former Bank President of New York Bill Dudley believes that attempting to control prices without spiralling into a recession would be extremely difficult.
  • 1994 and today's economy are different. Timing is seen to be the most critical factor. Mr Greenspan saw that economic growth and inflation were inevitable and thus, raised interest rates proactively to be ahead of the curve. However, Mr Powell is seen to be more reactive and may not be quick enough to combat the issues. 
  • Another factor contributing to the difference is the employment rates. Baby boomers were seen to be at the pinnacle of their careers with new technology in the workplace. The workforce and productivity in 1994 were unaffected despite the interest rate hikes. 2022 will see boomers exiting the market and reduced productivity. 
  • The year 1994 also saw the erection of the (NAFTA) North American Free Trade Agreement and the fall of the Berlin Wall. The impact of both events saw additional imports and lower costs of goods. Today's global events saw a pandemic and a war that has led to energy price shocks and supply chain disruptions. 

Gold Price

  • Spot Gold opens above $1,820/ounce as US Dollar Index (DXY) weakens. 
  • The impact on DXY could be attributed to the large interest rate hikes that the Federal Reserve has announced. 
  • Estimated US Retail Sales monthly figures have improved by 0.7% compared to 0.5%. Stronger numbers indicate that consumers are confident in the economy, and as a result, the DXY will strengthen and weaken gold prices.


  • France has pledged to protect Sweden and Finland against Russian threats as the latter has announced its decision to join NATO. 
  • The two countries seeking NATO membership will end decades of military nonalignment in a move driven by Russia's invasion. 
  • President Putin of Russia has stated that NATO membership is not concerned unless military infrastructure is expanded.




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