The Federal Reserve (Fed) faces a growing risk of experiencing an economic recession in dealing with rising inflation in the United States.
This is because, with inflation surging far above the central bank’s 2% target, the Fed will be under pressure to curb it thus pushing it to raise interest rates and implement monetary policy tightening faster.
At the same time, fiscal policy by the government will act as a barrier to growth due to rising pressure on commodity prices, especially rising energy.
Economist Lawrence Lindsey who is also a former Fed governor, put the possibility that there will be a recession by the end of next year triggered by the downturn in the Wall Street market.
Former Treasury Secretary and Democrat Lawrence Summers, who agreed with the statement, said the risk of a recession would begin in the next 30 months.
It is common knowledge that in the past week, financial markets have been shocked by US inflation figures which continued to show an increase in January at 7.5%, the highest since 1982.
Since then, some Fed policymakers have hinted that the central bank will raise interest rates in March and may be more aggressive in combating the inflation spike.
