{"id":480591,"date":"2022-08-02T23:11:28","date_gmt":"2022-08-02T20:11:28","guid":{"rendered":"https:\/\/en.buradabiliyorum.com\/us-faces-l-shaped-recession-as-fed-scrambles-to-tame-inflation\/"},"modified":"2022-08-02T23:11:28","modified_gmt":"2022-08-02T20:11:28","slug":"us-faces-l-shaped-recession-as-fed-scrambles-to-tame-inflation","status":"publish","type":"post","link":"https:\/\/buradabiliyorum.com\/en\/us-faces-l-shaped-recession-as-fed-scrambles-to-tame-inflation\/","title":{"rendered":"#US faces &#8216;L-shaped&#8217; recession as Fed scrambles to tame inflation"},"content":{"rendered":"<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-6a23b128722ef\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #dd3333;color:#dd3333\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #dd3333;color:#dd3333\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-6a23b128722ef\" checked aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/buradabiliyorum.com\/en\/us-faces-l-shaped-recession-as-fed-scrambles-to-tame-inflation\/#%E2%80%9CUS_faces_%E2%80%98L-shaped_recession_as_Fed_scrambles_to_tame_inflation%E2%80%9D\" >&#8220;US faces &#8216;L-shaped&#8217; recession as Fed scrambles to tame inflation&#8221;<\/a><\/li><\/ul><\/nav><\/div>\n<h1><span class=\"ez-toc-section\" id=\"%E2%80%9CUS_faces_%E2%80%98L-shaped_recession_as_Fed_scrambles_to_tame_inflation%E2%80%9D\"><\/span>&#8220;US faces &#8216;L-shaped&#8217; recession as Fed scrambles to tame inflation&#8221;<span class=\"ez-toc-section-end\"><\/span><\/h1>\n<div>\n<p>The US economy will likely have to stay in recession for longer than anticipated in order to bring runaway inflation under control, according to a top analyst.<\/p>\n<p>Zoltan Pozsar, the global head of short-term interest rate strategy at Credit Suisse Group AG, wrote a client note pushing back on widespread sentiment that the worst of inflation may be behind us and that the Federal Reserve will begin lowering interest rates.<\/p>\n<p>Instead, the US may have to gird for a so-called \u201cL-shaped\u201d recession that will be deeper and longer than expected, according to Pozsar.<\/p>\n<p>Pozsar cited the ongoing Russian invasion in Ukraine as well as disruptions to the supply chain exacerbated by intermittent COVID-related lockdowns in China.<\/p>\n<figure class=\"wp-block-image size-large\"><img loading=\"lazy\" decoding=\"async\" width=\"1024\" height=\"682\" src=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/shopping-mall.jpg?w=1024\" alt=\"Inflation has soared to levels not seen in four decades.\" class=\"wp-image-23301551\" srcset=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/shopping-mall.jpg?quality=75&amp;strip=all&amp;w=1535 1536w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/shopping-mall.jpg?quality=75&amp;strip=all 1024w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/shopping-mall.jpg?quality=75&amp;strip=all&amp;w=512 512w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\"\/><figcaption>Inflation has soared to levels not seen in four decades.<\/figcaption><figcaption><span class=\"credit\">Getty Images<\/span><\/figcaption><\/figure>\n<p>\u201cWar is inflationary,\u201d Pozsar wrote. His <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/www.bloomberg.com\/news\/articles\/2022-08-02\/pozsar-says-l-shaped-recession-is-needed-to-conquer-inflation#xj4y7vzkg\">note was earlier cited by Bloomberg.<\/a><\/p>\n<p>\u201cThink of the economic war as a fight between the consumer-driven West, where the level of demand has been maximized, and the production-driven East, where the level of supply has been maximized to serve the needs of the West.\u201d\u00a0<\/p>\n<aside class=\"single__inline-module alignleft\">\n<\/aside>\n<p>Pozsar also cited restrictions on immigration and a decrease in mobility brought about by the pandemic as key factors that have resulted in a tight labor market.<\/p>\n<p>As a result, Pozsar writes that the Fed may need to raise interest rates to either 5% or 6% and keep them there for a sustained period of time in order to cool down consumer demand so that it matches the tight supply.<\/p>\n<p>Meanwhile, analysts at Goldman Sachs are warning investors against complacency while noting that the economy remains at high risk of falling into a recession.<\/p>\n<p>\u201cLooking at the re-pricing of cyclical assets in the US and EU, we think the market might have been too complacent too soon in fading recession risks on expectations of a more accommodative monetary policy stance,\u201d Goldman analysts wrote.<\/p>\n<p>The note was <a rel=\"nofollow noopener\" target=\"_blank\" href=\"https:\/\/markets.businessinsider.com\/news\/stocks\/us-stock-market-outlook-rally-recession-risks-rates-goldman-sachs-2022-8\">first reported by Insider.<\/a><\/p>\n<p>Goldman analysts think investors could be mistaken in their belief that the Fed will stop hiking interest rates \u2014 and perhaps start to cut them as soon as next year in hopes of avoiding a recession.<\/p>\n<p>Citigroup economists put the odds of a recession as high as 50%. Citi\u2019s global chief economist, Nathan Sheets, said the current economic data constitute the Fed\u2019s \u201cworst nightmare.\u201d<\/p>\n<figure class=\"wp-block-image size-large\"><img decoding=\"async\" loading=\"lazy\" width=\"1024\" height=\"682\" src=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/grocery-stores.jpg?w=1024\" alt=\"The Fed is trying for a &quot;soft landing&quot; -- hiking interest rates while trying to avoid tipping the economy into a recession.\" class=\"wp-image-23301550\" srcset=\"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/grocery-stores.jpg?quality=75&amp;strip=all&amp;w=1535 1536w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/grocery-stores.jpg?quality=75&amp;strip=all 1024w, https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/grocery-stores.jpg?quality=75&amp;strip=all&amp;w=512 512w\" sizes=\"auto, (max-width: 1024px) 100vw, 1024px\"\/><figcaption>The Fed is trying for a \u201csoft landing\u201d \u2014 hiking interest rates while trying to avoid tipping the economy into a recession.<\/figcaption><figcaption><span class=\"credit\">AFP via Getty Images<\/span><\/figcaption><\/figure>\n<p>Sheets said the Fed is in a bind as it tries to combat both stubborn inflation worldwide as well as slowing demand.<\/p>\n<p>\u201cIt\u2019s really hard for central banks to fight that,\u201d Sheets said. \u201cI\u2019m cautious to use the word, but it feels at the moment that we\u2019re going through a period \u2026 [of] transitory stagflation.\u201d<\/p>\n<p>\u201cLooking at the re-pricing of cyclical assets in the US and EU, we think the market might have been too complacent too soon in fading recession risks on expectations of a more accommodative monetary policy stance.\u201d<\/p>\n<p>Top economists such as Nouriel Roubini said the Fed must choose between tolerating high inflation and tipping the economy into a recession.<\/p>\n<p>Last week, the Fed hiked its benchmark interest rate by 75 basis points \u2014 the second straight month it had done so \u2014 and the first time since 1994 that the central bank raised rates by 0.75% two months in a row.<\/p>\n<p>The latest rate hike came two weeks after the federal government released data indicating that prices rose by 9.1% in June \u2014 the highest since November 1981.\n                        <\/p><\/div>\n<blockquote><p><strong><span style=\"color: #ff6600;\">If you liked the article, do not forget to share it with your friends. Follow us on\u00a0<span style=\"color: #ff0000;\"><a style=\"color: #ff0000;\" href=\"https:\/\/news.google.com\/publications\/CAAqBwgKMLG0nwswvr63Aw\" target=\"_blank\" rel=\"nofollow noopener noreferrer\">Google News<\/a><\/span>\u00a0too, click on the star and choose us from your favorites.<\/span><\/strong><\/p><\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\">For forums sites go to <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/forum.buradabiliyorum.com\/\" target=\"_blank\" rel=\"noopener\">Forum.BuradaBiliyorum.Com<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<blockquote>\n<p style=\"text-align: center;\"><strong>If you want to read more <a href=\"https:\/\/buradabiliyorum.com\/en\/category\/news\/\" data-internallinksmanager029f6b8e52c=\"2\" title=\"News\" target=\"_blank\" rel=\"noopener\">News<\/a> articles, you can visit our <span style=\"color: #ff9900;\"><a style=\"color: #ff9900;\" href=\"https:\/\/en.buradabiliyorum.com\/news\/\" target=\"_blank\" rel=\"noopener\">News category.<\/a><\/span><\/strong><\/p>\n<\/blockquote>\n<p><span style=\"color: black;\"><a style=\"color: #ff9900;\" href=\"https:\/\/nypost.com\/2022\/08\/02\/us-faces-l-shaped-recession-as-fed-scrambles-to-tame-inflation\/\" target=\"_blank\" rel=\"noopener\">Source<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>&#8220;US faces &#8216;L-shaped&#8217; recession as Fed scrambles to tame inflation&#8221; The US economy will likely have to stay in recession for longer than anticipated in order to bring runaway inflation under control, according to a top analyst. Zoltan Pozsar, the global head of short-term interest rate strategy at Credit Suisse Group AG, wrote a client&#8230;<\/p>\n","protected":false},"author":1,"featured_media":480592,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"fifu_image_url":"https:\/\/nypost.com\/wp-content\/uploads\/sites\/2\/2022\/08\/gas-inflation.jpg?quality=75&strip=all&w=1024","fifu_image_alt":"","footnotes":""},"categories":[70897],"tags":[131967,5069,70550,70551,78738,91261],"class_list":["post-480591","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-news","tag-8-2-22","tag-economy","tag-federal-reserve","tag-inflation","tag-jerome-powell","tag-recession"],"_links":{"self":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/480591","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/comments?post=480591"}],"version-history":[{"count":0,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/posts\/480591\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media\/480592"}],"wp:attachment":[{"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/media?parent=480591"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/categories?post=480591"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/buradabiliyorum.com\/en\/wp-json\/wp\/v2\/tags?post=480591"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}