The Fed Just Raised the Odds of a Recession

The Federal Reserve pushed up the odds that the country will fall into a recession on Wednesday when it tightened up the flow of money in the most aggressive move in 22 years.

Led by Jerome Powell, the central bank has essentially put the economy in reverse and jammed on the accelerator in a bid to speed away from inflation, stoked by $5 trillion in stimulus, more than two years of practically free credit, and a global trade system jammed up by the lingering effects of the pandemic. Inflation is running at a 41-year high with few signs of gas and food prices coming down any time soon. It kicked off a program that will dump $47.5 billion in debt into the market in June — and double that starting in September — essentially swamping Wall Street with more risk as it grapples with global uncertainties. It’s very unlikely that this is a one-time move, with Wall Street predicting more half-point hikes to come, perhaps at each of the five next meetings this year. It’s possible that the Fed will be able to keep inflation down without sending the economy into an extended period in the red. During a press conference after the announcement, Powell said the central banks has “a good chance to restore price stability without a recession, without a severe downturn, and without materially higher unemployment.” But even former Fed governors find that to be an unlikely scenario.