Dr. Rubini: High interest rates, sticky inflation, and a combination of credit tightening! The US economy is destined to fall into a recession
On the 15th, the website of Business Insider reported that economist Nuriel Rubini, known as Dr. Doomsday, issued a more serious warning to the United States, stating that due to high interest rates, sticky inflation, and credit tightening, the US economy is destined to fall into recession.
The Federal Reserve announced on the 14th a suspension of interest rate hikes and stated that it may raise interest rates twice before the end of the year. A report released by the US Department of Labor on the 13th showed that the US Consumer Price Index increased by 4% annually in May, marking the eleventh consecutive decline and reaching a new low since March 2021, lower than market expectations. In addition, the key May core CPI increased by 5.3% annually, which is in line with market expectations and slightly lower than the previous value of 5.5%, indicating that inflation pressure continues to cool.
Even if inflation slows down, economists like Roubini are not entirely optimistic. He said in an interview, "I want to say that the likelihood of a hard landing is higher than a pure soft landing." "The economy is slowing down, and the Federal Reserve has already raised interest rates. In my opinion, they will have to further raise interest rates because wage inflation and core inflation are still too high."
According to Roubini, the Federal Reserve may continue to raise interest rates in July and September. Due to the turbulence in the banking industry squeezing loans from regional banks, credit growth has been hit, therefore, "an economic recession is bound to occur. Whether this recession is brief, mild, or more severe depends on many factors."‘
Roubini once published a column predicting that as the United States struggles with high inflation and high debt burden, the economic pain cycle is about to come. He said that these issues are interrelated and warned that economic recession and the upcoming financial crisis will only become more severe over time.
For months, Roubini has been warning of the arrival of a stagflation debt crisis, which will include a severe recession, combining the worst aspects of stagflation in the 1970s and the 2008 financial crisis. He expects this situation to lead to high inflation, low growth, and a 30% stock market crash.
He said, "A severe economic recession is the only way to alleviate rising prices and wages, but it will exacerbate the debt crisis, which in turn will lead to a deeper economic recession. As liquidity support cannot prevent this systemic vicious cycle, everyone should be prepared for the upcoming stagflation debt crisis."
