Bank of America Sees Recession Shock on the Horizon

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With inflation going too hard on the American economy it’s impossible to see things getting better any time soon. While the Federal Reserve is doing its best to put the country in a position to fight inflation, it could be too little too late. The prices are already sky-high for many consumer goods as well as homes. Increased interest rates and more difficulties borrowing money could put consumers at a distinct disadvantage.

Given the fact that inflation is at its highest level since 1982, there is a lot to be concerned with. While the feds raised rates a quarter of a point during their March meetings, the rumor is they will be seeking a half-point increase in May. Traders are getting themselves braced for it to happen, as 80% of them are now including that estimate in their projections. This kind of certainty has positive and negative connotations to it.

Federal Reserve Chairman Jerome Powell recently spoke up about the situation. “If we conclude that it is appropriate to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings, we will do so. And if we determine that we need to tighten beyond common measures of neutral and into a more restrictive stance, we will do that as well.”

As satisfying as it is to hear that they are taking the situation seriously, it is a bit troublesome to hear how the decision-making is being done. It leaves questions as to the expertise of the advice they are being given, and the level of thought they are giving to these decisions. With the levels of corruption in Biden’s cabinet and officials, the concern is very real.

Economists worry that the Fed waited too long to step up and do something. Yet others are worried that this will create the recession we have feared for ages. Increased interest rates will destroy consumer and business borrowing power. If people are scared to buy prices can correct themselves back down.

The problem is the people who need loans for things like homes have been snuffed out by the cash buyer who cares not what the interest rates for loans are. They can counter your loan-backed offer with cash, and close much faster. Thus, putting people out of the race, and keeping prices inflated. This is a delicate balance to find, but Powell and others are certain they will find it.

Back during the March meetings Powell cited the strong labor market, reasonable balances being held by businesses, and strong payroll growth as reasons to be unafraid. He said “The probability of a recession in the next year is not particularly elevated. All signs are that this is a strong economy and one that will be able to flourish in the face of less accommodative monetary policy.” While this is a particularly strong statement, it does nothing to guarantee success.

The American people need reassurance that they will be able to continue to afford to live. In cities like NYC, San Francisco, Los Angeles, and even Boise, Idaho people are being priced out of their neighborhoods. Between remote working, tech industry growth, and cash buyers people just could not afford to stay where they are. When they moved the housing was much cheaper (which made many of them cash buyers), but it also meant that bidding wars got started. In real estate, there is nothing more dangerous than a buyer who is happy to overpay because it’s cheaper than where they were before.

With the Labor Department reporting a 7.9% increase in February over last year, it makes the fastest increase since January of 1982 when inflation got to 8.4%. With 8% on the doorstep, it would represent a 40 year high, and without the proper actions, it could easily be surpassed. All of this thanks to Biden and his horrible team of leftist flunkies.