Musk, Roubini, Gates, and Goldman Warn of Rising US Recession Risk.

Elon Musk, Nouriel Roubini, Gates and Goldman Sachs Group Inc. have warned of a growing likelihood that the US economy will fall into recession.

Their outlooks will stoke fears of a hard landing for the world’s biggest economy as the Federal Reserve jacks up interest rates to counter the fastest pace of inflation in decades. 

Tesla Inc. Chief Executive Officer Musk said Tuesday that a recession in the U.S. looks likely in the near future.

“A recession is inevitable at some point. As to whether there is a recession in the near term, that is more likely than not,” Musk said in an interview with Bloomberg News Editor-in-Chief John Micklethwait at the Qatar Economic Forum in Doha. 

“It is not a certainty, but it appears more likely than not,” Musk said.

Microsoft co-founder Bill Gates expects factors like Russia’s war in Ukraine to accelerate inflationary problems that rich world economies have and force an increase in interest rates that eventually will result in an economic slowdown.

Though Gate’s warning of a slowdown falls short of a full-on recession prediction, Gates in an interview with CNN said, “I’m afraid the bears on this one have a pretty strong argument that concerns me a lot.”

Major central banks across the globe are racing to hike interest rates and ditch post-pandemic stimulus in a bid to tame inflation. A number of banks have raised interest rates since US Federal Reserve Chairman Jerome Powell announced a monetary policy normalisation earlier this year.

 In January, Powell had said that the US economy was in need of tighter monetary policy and that he expected the central bank would indulge in a series of interest rate hikes this year while reducing extraordinary help that the Fed had provided during the pandemic era. 

Elon Musk

“If things develop as expected, we’ll be normalising policy, meaning we’re going to end our asset purchases in March, meaning we’ll be raising rates over the course of the year,” CNBC had quoted him as saying in January this year.

Fed Chair Jerome Powell has vowed to do whatever it might take to curb inflation, including raising interest rates so high as to weaken the economy. If that happens, the Fed could potentially trigger a recession, perhaps in the second half of next year, economists say.

On Wednesday, the Fed raised its benchmark interest rate, which affects many consumer and business loans, by as much as three-quarter of a percentage point.

That would be the Fed’s largest rate hike since 1994, and it could herald the start of a period of especially aggressive credit tightening by the central bank – and with it, a higher risk of recession.

Analysts say the U.S. economy, which has thrived for years on the fuel of ultra-low borrowing costs, might not withstand the impact of much higher rates.

The nation’s unemployment rate is at a near-half-century low of 3.6%, and employers are posting a near-record number of open jobs. 

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