By Nathalie Voit
An ex-Fed insider told CNN a full-blown recession is “almost certainly” coming.
“Almost certainly there will be a full-blown recession. If we’re not in one yet, I think we will be in the next 12 months,” the former head of the New York Federal Reserve, Bill Dudley, told the news outlet in a phone interview.
According to Dudley, the central bank acted too late in taming out-of-control inflation. Dudley said that the Fed’s insistence that price hikes were ‘transitory’ for most of 2021 after months of consistent price increases left them with little to no choice but to slow down the economy severely. Many analysts believe this was a historical mistake.
The Fed’s only monetary policy tool at its disposal is aggressive interest rate hikes. Had the Board acted sooner, they could have avoided what Dudley now predicts will be a “hard landing.” Instead, they waited to raise rates until inflation was already very high.
“They got going really slowly,” Dudley said. “They’re late, and that means they have to do more. And that increases the risk of recession. I think a recession is highly likely, and I’ll be very, very surprised if they avoid a recession.”
Indeed, data from the Commerce Department showed the U.S. economy contracting for the second quarter in a row in the spring, adding to fears of an upcoming slowdown.
The good news? Dudley does think whatever recession is bound to take place will be mild.
