Major stock indices wavered this morning, as investors fretted over a potential recession and waited for the Federal Reserve to announce interest rate hikes on Wednesday.
Stocks had their worst day since 2020 last Tuesday after the Bureau of Labor Statistics announced that inflation was worse than expected, NPR reported, and fell again Friday as Fedex announced a massive cut to expected earnings and CEO Raj Subramaniam predicted a worldwide recession. Monday’s erratic trading continues a period of instability over the past four weeks, the severity of which has not been seen since markets struggled to come to grips with the impact of the COVID-19 pandemic in June 2020, the Wall Street Journal reported.
“We’re afraid that the Fed could surprise us with another jumbo hike,” said Florian Ielpo, an analyst at Lombard Odier Investment Managers told the WSJ, in reference to the possibility the Fed could raise interest rates by 1% instead of 0.75% following August’s unexpectedly high inflation. “[W]e very well could be at the entry point of the U.S. recession.”
Within a 24-hour period this week, there will be 16 central bank rate decisions, including from the U.S., UK, Brazil, Turkey, Indonesia, Philippines, Japan, Switzerland, Norway, South Africa, Egypt and Taiwan.
— Lisa Abramowicz (@lisaabramowicz1) September 19, 2022
The Fed has been raising interest rates this year in an effort to slow down economic activity and combat inflation, the New York Times reported. Fed Chair Jerome Powell has been transparent about the fact that interest rate hikes will likely slow the labor market and cause “pain” for some households and businesses, as his agency predicts the battle with inflation will last at least through the end of the calendar year.
Subramaniam was not alone amongst executives and corporate leaders warning of slowdowns or recessions, according to the NYT. Executives at General Electric, JPMorgan Chase and Bank of America joined billionaire real estate developer Barry Sternlicht in warning of significant economic slowdowns and dwindling corporate earnings.
The Biden administration has attempted to downplay the impacts of inflation. President Joe Biden claimed inflation had not spiked in months on a Sunday 60 Minutes appearance.
The Consumer Price Index has not spiked in recent months, however; this is mostly due to energy cost dropping from their historic highs, though they still remain significantly elevated, 23.8% higher than they were in August last year. Nearly every category besides energy increased from July to August.
Grocery prices in particular spiked to 13.5% higher year-on-year, a 40-year high that is five times the rate of 2020 and 2021. Last week, income inequality increased in the U.S. for the first time in ten years. The poorest American households saw their real incomes fall, while the richest American households saw their real incomes remain fairly financially steady.
The White House did not immediately respond to a Daily Caller News Foundation request for comment.
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