(Finance) – The week dedicated to the Federal Reserve opens, after the ECB announced a 50 basis point rate hike last week, stepping out of the era of negative rates. A move that follows the launch of the austere policies of the US central bank, which can only announce a another large increase in the cost of money of 75 points base. This decision was very surprising in June as it was the largest rate hike since 1994.
On the other hand, the attitude of the Fed President Jerome Powell has changed recently, as inflation hit peaks of 9.1% in June and fight against inflation became more important than the risk of falling into recession, which probably cannot be avoided. Something will be known for sure Thursday when the data of the Second quarter GDP after the former closed with a contraction of 1.6%.
The former Treasury Secretary does not rule out a recession Larry Summers, who said Fed bankers must commit to repressing inflation which has peaked in the past four decades. “We need strong action by our central bank, “Summers said, speaking to CNN and saying he was encouraged by the decisions made by the Fed.
“There is a very high probability of recession when we have already found ourselves in this type of situation, “Summers said, explaining that” a recession always follows periods of high inflation and low employment. “Then, the economist criticized the policy of the American government, stating that taxes and do more to keep inflation in check. “If we continue with the ostrich policies as in 2021, there will be much, much more to suffer later.”
The colleague’s point of view is different Janet Yellencurrently secretary to the Treasury, which continues to exclude the risk of a US economic recession. “What we are seeing is a necessary and appropriate slowdown,” said Yellen, confident that the Fed’s tightening policies will work.