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Politico published an article Monday which warned that despite President Joe Biden’s attempts to reassure the public and investors that a recession is not inevitable, “He is an increasingly lonely voice.”
“From Wall Street to Washington, whispers about a coming economic slump have risen to nearly a roar as the Federal Reserve ramps up its battle against the highest inflation in four decades,” economics reporter Victoria Guida wrote in “No More Whispers: Recession Talk Surges in Washington.”
Many in finance and the media have warned about a potential recession for months, with Bloomberg publishing a piece in May arguing that the Federal Reserve likely expected a recession back then.
“Fed Chair Jerome Powell has begun saying the quiet part out loud,” Guida wrote. “The central bank is willing to tolerate a recession if it means getting inflation under control.”
“While Biden has publicly backed Powell’s efforts, raising expectations of a recession are compounding the administration’s economic woes as Democrats head into congressional elections this year,” she continued.
President Biden has stated publicly that a recession is not inevitable. “There’s nothing inevitable about a recession,” Biden said when asked by a reporter last month. “Don’t make things up,” he told the reporter.
However, Politico’s reporting contradicts Biden’s rhetoric on inflation. “Across the nation, the leading topic of economic conversation — high inflation — is swiftly morphing into growing certainty of a coming recession,” she wrote. “White House allies are bracing for it. Republican lawmakers are trumpeting that a downturn is inescapable.”
As for leaders in finance and industry, “Wall Street analysts are increasingly building it into their forecasts. And business leaders have rapidly moved from muted fears to openly chattering about an economic slump during investor discussions and inside their companies.”
Guida noted that “foreboding questions loom large: Does the U.S. need a recession to tame inflation? How soon? And will the Fed continue raising rates even if the country enters a downturn until inflation retreats?”
“Michael Feroli, the chief U.S. economist at JPMorgan Chase, said a downturn could even start as soon as this quarter, with recent data showing that consumer spending — the biggest driver of GDP — is beginning to slow,” she wrote.
Guida noted that Feroli said, “Things are looking like we’re losing altitude pretty quickly.”
“The government confirmed last week that the economy shrank in the first three months of the year — and the Atlanta Fed’s economic growth tracker is pointing to the increased chances of a second-quarter contraction,” she wrote.
Inflation and a slowing economy can negatively affect Democrats in the 2022 midterm elections, pundits say.