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Fed Interest Rate Hike Will Exacerbate Recession: Elon Musk

  • Elon Musk predicts a recession if the Federal Reserve hikes interest rates again.

  • Several economists also believe that prolonged rate hikes will increase the chances of recession.

  • The next FED interest rate hikes meeting is scheduled for December 15.

10 Dec 2022 By: Sudeep Saxena
Fed Interest Rate Hi

Twitter boss Elon Musk claimed that the next interest rate hike by 

The US Federal Reserve, which is scheduled for Dec 15, will exacerbate the recession. 

The world's richest man and mercurial electric car executive remarked on Twitter, "If the Fed hikes interest rates again next week, the recession will be severely exacerbated."

Elon Musk predicted a recession

In October,  Elon Musk was asked by the Twitter account Tesla Owners Silicon Valley how long he expected the recession would persist, and he answered, "Just guessing, but probably till spring of 24."

Economists predict that the Federal Reserve will announce the last hike of 2022 next week. Fed Chair Jerome Powell also signaled that when the Fed meets next week, the benchmark interest rate will most likely be raised by a smaller increment. The question is whether the rate hike will be 0.5 or 0.75 percentage points. On December 15, the US Federal Reserve will release its interest rates.

In an effort to control inflation, the Federal Reserve issued a fourth consecutive 0.75 percentage point rate hike in November last month.

Economists' view on recession

Many economists believe that prolonged rate hikes will discourage borrowing in 2023, increasing the likelihood of a recession. According to 42 economists polled by Bloomberg, the risk of a recession in the following year has risen to 60%.

Between October and November, the cost of goods grew by only 0.1%, while wholesale gas prices fell by 6%. (Food prices were an exception, rising 3.3% last month due to higher-priced chicken, eggs, and vegetables.)

In contrast, the cost of services rises by 0.4%, owing mostly to rising financial sector charges. The consumer price index, the most generally known inflation indicator issued by the US government, will be released. 

In the most recent CPI report for October, prices were up 7.7% from a year ago, indicating that inflation was slowing. Despite remaining high, that was the lowest comparison figure since January.

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