The Breakdown, With NLW: Economists See Increasing Risk of Recession and Stagflation
The past few weeks have seen a rising number of economists and analysts who see a rising risk of a recession in the US. A combination of factors is at play.
First, there’s rising interest rates. That tends to slow economic activity as the cost of capital rises. Then there’s Russia’s invasion of Ukraine. That has led to a supply shock in a number of key commodities.
And with the recent yield curve inversion, the view is that the odds of a recession are on the rise.
On “The Breakdown,” these latest pronouncements by prominent economists looks into detail on the risks for a rising recession.
The facts are simple. The Federal Reserve creating substantial stimulus over the past two years. Now there’s been a decision to withdraw that stimulus, as it’s clear that the Fed is trying to contain the inflation that’s it’s helped create.
The real issue here is whether we get a standard recession, where prices drop overall. Or, if we get stagflation. First coined in the 1970s, stagflation is the combination of a declining economy with rising prices.
Back in the 1970s, loose monetary policy allowed stagflation to rise. Many of the same conditions are in place today for that to happen again.