Diane Swonk, chief economist at KPMG and CNBC’s Steve Liesman, discuss the state of the U.S. economy and whether the chances of a ‘hard landing’ for the Fed could happen. For access to live and exclusive video from CNBC subscribe to CNBC PRO:
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BREAKING: Recession News
LEARN MORE ABOUT: Bank Failures
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The Federal Reserve, America’s central bank, is facing growing concerns over the risks associated with its decision to continue raising interest rates. According to renowned economist Diane Swonk, this move is potentially opening the gates for an “overshoot” that could send the country into a severe recession.
Swonk, the chief economist at Grant Thornton, warns that the Fed’s relentless pursuit of higher rates without considering the wider economic environment could result in disastrous consequences. While the central bank’s objective is to maintain stable inflation levels and prevent the economy from overheating, it also needs to take into account the vulnerability of other sectors.
The Fed has been gradually increasing interest rates in recent years, aiming to strike a balance between a strong economy and stable inflation. However, Swonk worries that the rate hikes will push borrowing costs too high, thereby hampering individuals and businesses alike. This risks curbing consumer spending, impacting housing markets, and potentially sparking a downturn that could plunge the economy into a deep recession.
In this era of interconnectedness, it is crucial for central banks like the Fed to consider the global implications of their decisions. Swonk argues that the raised interest rates may attract international capital, strengthening the dollar. This, in turn, could weaken emerging market economies, leading to potential financial crises or currency wars.
Furthermore, there is a concern that the Fed has become too focused on inflation as a sole indicator of economic well-being. By excessively raising interest rates to combat inflation, the central bank may overlook other factors such as wage growth, labor market dynamics, and investment levels. Neglecting these areas could lead to a severe downturn in the long run.
Swonk’s worries about a potential overshoot are not without foundation. History has shown that Fed tightening cycles have often preceded economic recessions. The central bank needs to strike a careful balance between curbing inflation and supporting economic growth.
The current global economic uncertainties further amplify the risks associated with aggressive rate hikes. Trade disputes, Brexit, and geopolitical tensions are all factors that could exacerbate the negative impact of a potential recession triggered by an overshoot in rate hikes.
It is crucial for the Federal Reserve to reassess its current strategy and take a more cautious approach. A willingness to adapt and consider the broader economic landscape, as well as the potential risks associated with aggressive rate hikes, is vital to preventing a deep recession. Monetary policy should concentrate on addressing not only inflation but also other key factors that contribute to a healthy and sustainable economy.
Ultimately, the issue lies in finding the delicate balance between maintaining desirable inflation levels and safeguarding against an economic downturn. As Diane Swonk points out, an overshoot on rate hikes carries significant risks and could ultimately lead the United States and potentially the global economy into a deep recession.
Great stream, as always. I appreciate the level-headed approach you take to the news and the markets. . A lot has changed and that's on everything but the truth is I don't even care much about bullish or bearish market anymore because Andrew Martins got me cover as I am comfortably making 5.1B T C monthly.
The feds have no idea what they are doing and they are the reason why we might go into a recession because of them. They are putting us at risk of going into a deep recession. I clearly blame the feds for their mishandling of the economy.
So I should vote for more Democrats because…. Why? Is more spending and more funding Ukraine going to stop rising gas and food costs? No. Conservatives run the economy better. It's pretty obvious at this point.
Better to declare Recession rather than scaring all the time,Scary news has caused much worse damage than Recession would have done,What could Recession do,stock may loose 40-50% but most stock are 70-80% down anyway yet Recession will come Joke
Although it'll be a global recession, which is characterised by a decline in annual global per capita income, is relatively uncommon due to the faster growth rates of emerging markets like China, in comparison to developed economies. I have pulled out more than $340k from my bank. After all, the FDIC covers only up to $250,000, and the implosion could have bad effect. Looking to invest into the stock market now. Does anyone know how I could go about it?
If the recession hits hard democrats will have their poop chutes blown out in the next election. Lol.
I thought deflation was feared in 2000 after the last stock bubble , so now we can fear deflation next year cause they can not have patience ?
4:20 when is steve going to get his own show? I heard some rumblings about it
0:06 Thank you dom for bring up the point of pullback over normalization. This entire past decade-ish, I have been pondering upon this.
Risk management is a vital element of success for any trader in any mar:ket. No matter the size of the capital you’re trading with or investing in, losses are going to be inevitable, particularly in highly volatile markets like crypt0currency. Learning how to manage risk to minimise losses is vital. Yet, it’s also necessary to master risk management in order to ensure maximum gains. After all, the more you’re willing to risk, the greater the potential reward. I’m not a pro Trader but I was lucky enough to make 25’B’T’C since late last year following the instructions and Signals from Benjamin mason . He runs program for investors/newbies who lack understanding on how tradIng Bitcoin works, to help them utilise the volatility of the crypto market and also stack up more bitcoin.
Risk management is a vital element of success for any trader in any mar:ket. No matter the size of the capital you’re trading with or investing in, losses are going to be inevitable, particularly in highly volatile markets like crypt0currency. Learning how to manage risk to minimise losses is vital. Yet, it’s also necessary to master risk management in order to ensure maximum gains. After all, the more you’re willing to risk, the greater the potential reward. I’m not a pro Trader but I was lucky enough to make 25’B’T’C since late last year following the instructions and Signals from Benjamin mason . He runs program for investors/newbies who lack understanding on how tradIng Bitcoin works, to help them utilise the volatility of the crypto market and also stack up more bitcoin.
The investor class is so nervous because that’s where the liquidation has to happened if the jobs aren’t going to liquidate, and the consumer is not giving up their cash, the liquidation Hass to come in equities
WE LOVE STEVE MORE LESMAN PLEASE OK THANKS
Steve is best – every time he talk I turn volume UP
The bots on here trying to get people to “invest” with fake advisors are ridiculous. YouTube/insta/etc need to do something. Scams everywhere and lots of older people are falling for them it’s sad. If you see someone trying to get you to invest on a social media post it’s fake. Don’t believe them
a sushi dinner for 3 now cost $70 before tip…restaurants are price gouging now.
Bond market has been screaming at us that yields have peaked
The stock market has been rallied since the beginning of 2023, expecting the Fed to pivot and cut by July. They don’t believe the Fed is willing to raise more interest beyond June-July FOMC meeting.
The most important thing that should be on everyone's mind currently should be to invest in different sources of income that doesn't depend on the government. Especially with the current economic crisis around the word. This is still a good time to invest in various stocks, Gold, silver and digital currencies.
I will sell Finnish bonds for 5 bitcoins
They need to raise it 5 points
In the future The Fed will not be able to drop rates fast enough
These Liberals are right, we need more inflation if communism is ever going to stick in America.
Our modern civilization is in big trouble. We are a losing many front war against nature. Biosphere is being destroyed by overshoot and symptoms climate change, ice loss, ocean acidification and deoxygenation, soil loss, chemical pollution, 6th mass extinction and the final nail in the coffin is peak oil. See the Great Simplification by Nate Hagen.
When will these 'smart dummies" understand we are in the 16th month of recession. It is simply getting worse. The question is not will we go into recession as we are already there. So real education is needed for ALL on cnbc.
We need deflation.
Excellent explanation from Steve
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