The entire world was bracing for a US recession at the start of 2023. Over six months down the line, the world’s largest economy is not shrinking, at least not yet. But if the US Federal Reserve continues with its obsession to bring inflation back to 2 percent, it will break the US economy and shake up the rest of the world in the process.
“2 percent made sense in 2012. It doesn’t make sense today. Too much has changed,” Mark Matthews of Bank Julius Baer and Co (a Swiss wealth management group) told CNBC-TV18 on July 17. If the US continues with its tough stance, and hikes interest rates a few more times, the impending recession could be a lot more painful.
So far, four banks have collapsed — the blame for which has fallen on the US Fed sucking out the liquidity to tame inflation — and the US economy has been able to withstand it with some grace. Tough to say, if it can take more bank failures in the near future.
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