The U.S. Federal Reserve’s efforts to curb inflation could move the country closer to recession as it mulls yet another quarter-of-a-percentage-point increase to the benchmark interest rate, moving it to a range of 5% to 5.35%, according to reports.
The Guardian reported this week that as the Federal Reserve considers its priorities in the fight against rising prices, it was considering what would be the 10th consecutive rate hike, from rates that were near zero just a year ago.
“A decline in economic growth to 1.1% shows it is time for the Fed to pause,” Robert J. Shapiro, an economic advisor during the Clinton administration, told the news outlet.
According to The Guardian, core inflation, which does not take into account the rollercoaster prices for energy and goods, rose 0.1% to 5.6% in March, while annual consumer inflation fell from 6% to 5%.
Adam Posen, the head of the Washington, D.C.-based think tank Peterson Institute, maintained the central bank should “continue its hiking cycle given what the latest data is telling us,” The Guardian reported.
Moreover, Shapiro told the news outlet he believes the Fed should put the brakes on rate hies because it has done enough to combat inflation and add stability to the economy, with more rate hikes likely to spark a recession that would hurt low- and middle-income workers.
“There is a significant lag between interest rate rises being imposed and them taking effect, and so we know there is more pain for the economy to come even without further rate rises,” Shaprio said, according to the report.
Neil Shearing, chief economist for Capital Economics, told The Guardian this hike should be it due to existing signs the economy is slowing down.
“The labor market is cooling and given all the problems in the U.S. banking system and tightening lending conditions, there won’t be any call for higher rates,” he told The Guardian.
