A recession is “inevitable” despite President Joe Biden’s claims to the contrary, former president of the Federal Reserve Bank of New York, Bill Dudley, outlined in a Bloomberg Op-Ed on Wednesday.
“If you’re still holding out hope that the Federal Reserve will be able to engineer a soft landing in the US economy, abandon it,” Dudley wrote. “A recession is inevitable within the next 12 to 18 months.”
Dudley’s reasoning is broad. First, he pointed out the Fed will have to focus on tamping down inflation with interest rate hikes instead of growing the economy. Second, if the Fed fails to reduce inflation, soaring prices may continue, resulting in expectations that “would likely become unanchored, necessitating an even bigger recession later.”
He also explained the “Fed has never tightened enough to push up the unemployment rate by 0.5 percentage point or more without triggering a recession.” Dudley continued, “[a]ccording to the Sahm rule, when this trigger is reached the next stop is a deeper slump, in which unemployment increases by at least 2 percentage points.”
Federal Reserve officials on Wednesday revealed new projections for the economy that reveal central bankers now expect the economy to grow less while inflation, unemployment, and interest rates to run higher than previously forecast. https://t.co/0bag7UcG55
— Breitbart News (@BreitbartNews) June 16, 2022
The former president of the Fed’s analysis draws a conclusion contradictory to Biden’s. The president has claimed multiple times a recession is not inevitable. On Thursday, Biden told the Associated Press that a recession is “not inevitable.”
Biden repeated the mantra again on Tuesday. “No, I don’t think it is,” Biden said Tuesday. “There’s nothing inevitable about a recession.”
Members of Biden’s administration agree. Four separate times on Sunday shows, Biden’s economic team stated a recession is not inevitable. “Not only is a recession not inevitable, but what we as policymakers can do is take steps to build on our unique strengths in the American economy,” director of the National Economic Council Brian Deese claimed on Fox News.
Treasury Secretary Janet Yellen said on ABC News’s This Week she does not “think a recession is at all inevitable,” but acknowledged “inflation is unacceptably high.”
Goldman Sachs CEO David Solomon said his bank is warning clients of a possible recession. https://t.co/iTrSFC0YYk
— Breitbart News (@BreitbartNews) May 19, 2022
But Yellen has been wrong before. Some Republicans want Yellen to resign over her failure to prevent inflation, a key factor in the likely recession in 2023. Yellen has acknowledged she incorrectly predicted inflation.
“Well, look, I think I was wrong then about the path that inflation would take,” Yellen told CNN’s Wolf Blitzer in May.