November 29, 2022

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Fed official warns UK tax cuts are increasing risks of global recession

Fed official warns UK tax cuts are increasing risks of global recession

The UK government’s new fiscal plan has increased economic uncertainty and raised the prospects of a global recession, a senior US central bank official warned after the pound touched a record low.

talking while pound saw The merchants also absorbed the British Finance Minister Quasi Quarting The £45bn tax cut package, said Rafael Bostic, president of the Federal Reserve Bank of Atlanta, said the plan had “really increased uncertainty and made people really question what the trajectory of the economy would be”.

Asked whether the plan and the resulting fluctuations would increase the chances of the global economy entering a recession, Bostik said: “It doesn’t help.”

“The basic tenet of economics is that more uncertainty leads to less participation by consumers and businesses,” he said. “The main question will be, what does this mean for the eventual weakening of the European economy, and it is an important consideration for how the US economy is doing.”

Bostick’s comments followed a warning from Susan Collins, president of the Federal Reserve Bank of Boston, who said an external shock could push the US economy into recession.

Speaking at Monday’s event, Collins, whose term began in July, highlighted the challenges facing feed it As it faces price pressures that are proving more difficult to eradicate than expected as they spread to a wide range of sectors.

“A major economic or geopolitical event can push us around The economy is in recession “With policy tightening even more,” said Collins, a voting member of this year’s FOMC and the first black woman to lead a bank branch.

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“Moreover, the calibration of policy in these circumstances will be complicated by the fact that some of the effects of monetary policy are operating late,” she added.

Collins and Postich are among the first Fed officials to make public statements since the central bank last week implemented a 0.75 percentage point increase for the third time in a row and signaled more big increases to come.

Most officials see the federal funds rate rising to 4.4 per cent by the end of the year before peaking at 4.6 per cent in 2023. It ranges between 3 per cent and 3.25 per cent.

Also Monday, Loretta Meester, president of the Cleveland Federal Reserve, spoke about the global ramifications of the Fed’s aggressive campaign to tighten monetary policy, which has fueled a massive appreciation of the dollar against currencies globally.

“We will put in place appropriate monetary policy for the American economy, but we do not put it in a vacuum thinking that we are an independent island and not connected to the rest of the world,” he said at an event hosted by the Massachusetts Institute of Technology.

With inflation at multi-decade highs, Meester said “this is not the time” to worry about the risks of overdoing it in terms of monetary policy tightening, and she has identified the very high impediment for the Federal Reserve to backtrack on its plans to slow the economy.

“Wishful thinking cannot be a substitute for hard evidence. So before I conclude that inflation has peaked, I will need to see several months of dips in readings month after month.

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Meanwhile, Collins said that “it is very likely that inflation is close to the peak and may have already peaked.”

However, she noted that there are some limitations on the Fed’s tools, particularly in terms of relieving supply bottlenecks and labor shortages that have helped push inflation to its highest level in nearly four decades.

Like other officials, Collins believes the job losses accompanying this tightening cycle may be less severe than in the past.

As employers struggle to find workers – resulting in one of the tightest labor markets in decades – most officials see the unemployment rate rising only to 4.4 percent in the coming years from 3.7 percent.

“There’s a really good chance that if we have lost jobs, it’s going to be less than we’ve seen in other situations, and that’s what I’m counting on,” Bostick said in an interview with CBS Sunday.

“We will do everything we can at the Fed to avoid deep, deep pain, and I think there are some scenarios where that is likely to happen,” he said.