Can Fed avoid recession that threatens US economy?

The likelihood of a recession is one big question that is being discussed again and again as observers, including former Fed officials still argue that there is still an obvious risk of a recession.

Jerome Powell and Co. are seen as walking on a fine line. The extent of fiscal stimulus, including the pandemic, CHIPS Act, and Infrastructure Act, are factors that stimulated the US economy, leading to a strong third quarter.

The fragility of the banking industry and the need for rate cuts are still among the big issues that need to be duly addressed to help the economy avoid a recession.

The Federal Reserve held interest rates steady for the third time this year, despite facing a resilient economy and too-high inflation. As the Fed continues to handle inflation, economists argue that rising unemployment could pose a “real danger” in the future.

The Federal Reserve is also seen as in a “no-win” position, as rising unemployment could pose a “real danger” in the future. The Fed’s fight against inflation has a growing impact on middle-class Americans, and they will be under pressure to lower rates sooner, even with inflation above 3%.

A rate hike is now off the table unless the US sees a very big surprise inflation. The high rates and fragile economy will accelerate the rate cut very quickly, as the risk of a recession remains a valid scenario for next year.