Are we heading for a recession?
BIRMINGHAM, Ala. (WBRC) - Are we heading for a recession? At least one major bank thinks so, but what are local analysts saying?
And what should you do if we actually end up in a recession?
The Deutsche Bank just announced that it’s predicting a major recession pointing to the Federal Reserve wanting to bring down rising prices by raising interest rates.
Associate Economics Professor at UAB Dr. Josh Robinson said a recession is not outside the realm of possibility, but he said there is plenty of data that runs counter to Deutsche Bank’s prediction.
He said the primary concern is U.S. inflation, which continues to accelerate.
He said the only way to really stop that from happening is to tighten the availability of money either by reducing the money supply, increasing interest rates, or doing a combination of both.
Dr. Robinson said doing this too quickly will shock the economy which could interrupt business investment plans, consumer spending, and homebuying just to name a few, ultimately causing a recession.
But Deutsche Bank isn’t confident the federal government can do this gradually because inflation is already too high.
Dr. Robinson offered a counter argument.
“We don’t know if the fed is capable of getting this under control or not. They’ve only had one meeting since they kind of decided that inflation was actually not transitory, it wasn’t going anywhere. They’re about to have their second meeting here in a week or so where we’re anticipating a sizeable rate hike. Probably half a point, so 50 basepoints, and we’ve yet to see how the economy, how inflation will respond to a sizeable move like that,” Dr. Robinson said.
So, what should we be doing now just in case?
Dr. Robinson said a lot of Americans have disposable income right now because of stimulus payments and tax returns.
So, if anything, we should prepare for higher inflation.
But he said if you don’t already have a nest egg available, it doesn’t hurt you to start saving money and tightening your budget.
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