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Another Large Rate Hike Expected as US Inflation Climbs

Inflation reached a new 40-year high last month, a sign that demand is still hot. But other signs show the U.S. economy slowing—putting the Federal Reserve into a tricky situation. The Fed is expected to raise interest rates another 0.75% tomorrow, according to The Wall Street Journal. "They have increased rates at a historically rapid pace this year, and the outlook for inflation and growth is highly uncertain," the article reads. 

According to CNBC's Fed Survey, 63% of respondents believe the Fed's effort to bring down inflation will create a recession. Respondents (who include fund managers, investors and economists) put a 55% chance of a recession in the next year, up 20 points from the May survey.

"A path to a soft landing certainly exists, but it's narrow, hidden and very hard to find," wrote Roberto Perli, head of global policy research at Piper Sandler. "In fact, some indicators suggest the U.S. economy may either already be in recession or close to it."

Yet, Treasury Secretary Janet Yellen believes "healthy hiring" is proof the U.S. economy can avoid a recession. "Consumer spending is growing; Americans' finances, on average, are solid; and the economy has added more than 400,000 jobs a month this year, a robust figure," per the Associated Press. "The unemployment rate is 3.6%, near a half-century low." 

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Monday, 15 August 2022