Bank of America's new U.S. chief economist has projected that the Federal Reserve will trigger a recession as it hikes interest rates to cool inflation.
Federal Reserve Chair Jerome Powell arrives to speak at a news conference, March 3, 2020, in Washington.
Hiking interest rates tends to create higher consumer and business loan rates, which slows the economy by forcing employers to cut back on spending. Mortgage rates have nearly doubled from one year ago, while some credit card issuers have ratcheted up their rates to 20%. Economic output is already falling in the U.S. Gross domestic product, the broadest measure of goods and services produced across the economy, shrank by 0.9% on an annualized basis in the three-month period from April through June. Growth already tumbled 1.6% in the first three months of the year.
Recessions are technically defined by two consecutive quarters of negative economic growth. They are characterized by high unemployment, low or negative GDP growth, falling income and slowing retail sales, according to the National Bureau of Economic Research , which tracks downturns., which requires a "significant decline in economic activity that is spread across the economy and that lasts more than a few months.
Powell told reporters last month that he does not believe the U.S. economy is in a recession, citing the low unemployment rate and the 2.7 million jobs created in the first half of the year.
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