<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1656513747875,"cms.content.publishUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1656513747875,"cms.content.updateUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_56513586", "obj": {"id":"27789","width":"16","height":"9","video":"1042573"} }); ","_id":"00000181-afe9-d447-ad8b-ffebd59e0000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video EmbedWorld Bank Chief Economist Carmen Reinhart said it will be tough for the United States and global economies to skirt a recession.
Reinhart cited soaring inflation in the U.S. and across the world, as well as central banks aggressively hiking interest rates in response, as indicators of a recession. She also highlighted a slowdown in growth in China, which has instituted strict pandemic mitigation measures.
“I’m pretty skeptical,” she told Reuters about the prospect of the U.S. and other countries avoiding a recession.
She said it will be difficult for the Federal Reserve to pull off a “soft landing,” or raise interest rates at a brisk enough pace to drive down inflation while simultaneously avoiding recessionary conditions. Historically, it has been difficult for central banks to do so.
FEDERAL RESERVE PRESIDENT PUSHES BACK ON RECESSION FEARS: ‘THE ECONOMY IS STRONG’
“What worries everybody is that all the risks are stacked on the downside,” Reinhart said.
“In the mid-1990s, under [Federal Reserve] Chairman [Alan] Greenspan, we had a soft landing, but the inflation concern at the time was around 3%, not around 8.5%. It’s not like you can point to a lot of episodes of significant Fed tightening that haven’t taken a toll on the economy,” she explained.
Current Fed Chairman Jerome Powell has faced criticism from Republicans and some economists for not acting sooner to raise interest rates. The first rate hike after months of keeping rates at near-zero levels came in March.
“The Fed should have acted — and I’ve been saying this for a long time — sooner rather than later and more aggressively,” Reinhart said. “The longer you wait, the more draconian the measures you have to take.”
Earlier this month, the Fed announced that it would hike its interest rate target by three-quarters of a percentage point, to a range of 1.5% to 1.75%. The central bank typically raises rates by just a quarter of a percentage point, so the move shows desperation on the part of the Fed. It had also previously conducted a half percentage-point hike.
Even Powell is acknowledging that a soft landing will be a tough task. Speaking at a panel on Wednesday morning, he said avoiding a recession will be “quite challenging.”
“We think that there are pathways for us to achieve the path back to 2% inflation while still retaining a strong labor market. We believe we can do that,” Powell said, adding that “there’s no guarantee that we can do that.”
CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER
Earlier this month, the World Bank said that many countries across the world will struggle to prevent a recession this year and pared down its global growth forecast.
The financial institution now projects global growth to fall to 2.9%, a decrease of 1.2 percentage points from its previous forecast at the start of the year. The World Bank said alarm bells are flashing red for a “protracted period of feeble growth and elevated inflation.”
