Nobel economist Paul Krugman warns of nagging inflation - but he sees only a 25% chance of a US recession
Paul Krugman expects nagging inflation to force the Federal Reserve to keep lifting interest rates — but he sees only a slim chance of a US recession.
In response to inflation spiking as high as 9.1% last summer, the Fed has lifted its benchmark rate from virtually zero to upwards of 4.5% in the past year. Higher rates can curb price increases by encouraging saving over spending and making borrowing more costly. However, they can also weigh on asset prices and choke demand, sparking an economic downturn."I might have said different before the, which was so strong," he said.
"If it stopped now, the markets would take that as a signal basically to go out and have a party," he said."We're probably not ready to have that yet."
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