An American Recession Could Happen, But It's Not As Bad As The 1980s

Silahkan tunggu orang sabar di sayang mantan . Loading...

An American recession could happen this year, but it's not as bad as the 1980s recession scenario. That's according to Randall Kroszner, a former Member of the Board of Governors of the Federal Reserve and Professor of Economics at the University of Chicago Business School.

According to Bank of America strategists, large players provide an 80 percent chance of a mild recession occurring, while a severe recession is given a 30 percent chance.

American Recession Could Happen

In the Wall Street Journal, Senator Elizabeth Warren wrote that the Federal Reserve risks triggering a major recession if it continues to increase interest rates at current rates.

Responding to this, Kroszner said the chances of a recession are increasing, but it will not be a recession as bad as the 1980s. The reason, he saw the Federal Reserve has taken lessons from the past.

The annual rate of inflation is currently at 9.1 percent, the highest since 1981. The Fed is implementing a strategy of increasing interest rates to cool the economy.

“The Fed made a mistake in the 1980s. When inflation goes up, interest rates go up too, but when inflation goes down, the Fed lowers interest rates," Koszner said, quoted by Fortune.

He continued, when inflation really skyrocketed, the Fed was forced to increase interest rates to exceed 10 percent. In 1981, interest rates reached 19 percent.

The latest increase last week brought the Fed's interest rate to 2.5 percent. This time, the Fed will continue to keep interest rates high to ensure inflation declines consistently, Kroszner added.

Fed officials say they are prioritizing curbing inflation over avoiding a recession. However, Kroszner said the central bank should remain careful to control interest rates to prevent the unemployment rate from rising or the market sluggish.

The US economy is experiencing low unemployment and a strong labor market amid rising interest rates. This has led economists to say that the recession is mild.

On the other hand, high interest rates can weaken the labor market. In addition, the US economy faces global supply chain problems, high energy costs, the Russia-Ukraine war and geopolitical tensions in Asia that have an impact on global markets.

The US unemployment rate stands at 3.6 percent. The Fed predicts the figure will not exceed 4 percent, but Kroszner expects unemployment to exceed that percentage.

A vulnerable economy could push the unemployment rate to more than 6 percent, Kroszner said.

Silahkan tunggu 20 detik.

Silahkan klik Go to link untuk melanjutkan

Share this post