New data shows that the US economy is growing slower than expected. “We expect a recession to follow in the second half of this year,” says Rabobank economist Philip Marey. “The Fed’s decisions mean it is gradually becoming inevitable.”
In the first three months of the year, the US economy grew by just 1.1%. “You can see that corporate investment in particular is declining,” Marey says. “There is also a contraction in corporate inventories and residential investment was already declining.” According to him, higher interest rates are gradually starting to become visible in the economy. “Now it is mainly companies that are suffering from this.”
‘Higher interest rates are gradually starting to show themselves in the economy. Now it is mainly the companies that are suffering from it’
Eventually, consumers will suffer as well, Marey expects. ‘Because companies not only invest less, but also hire less staff. We expect consumers to start feeling it by the end of the year.’
The Fed wants to squeeze inflation out of the economy
And all this opens the door to a recession. “I assume it will follow in the second half of this year,” says the economist. “It’s become kind of inevitable because the central bank, the Fed, wants to squeeze inflation out of the economy. The only way to do this is to reduce the demand for labour, which will increase unemployment and reduce consumption.”
Marey expects the Fed to add another quarter when it makes its interest rate decision next week, and then stop raising interest rates for the remainder of the year.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
