Elon Musk has warned that if the Federal Reserve does not change its present interest-rate policy, the United States will experience a big recession.
The central bank has raised target federal funds rates by 0.75% four times in a row, marking the most dramatic tightening of monetary policy in decades. As a result, interest rates across the economy, such as mortgage rates and the premiums paid by firms and individuals to borrow money, have rapidly climbed.
The creator of Tesla accessories vendor Tesmanian, Vincent Yu, projected a “serious economic recession” next year, prompting Musk to call the current state of the economy “concerning.” He went on to say that the Federal Reserve is “massively increasing the likelihood of a severe recession” and “has to decrease interest rates immediately.”
Some analysts, which include Wharton School finance professor Jeremy Siegel, have heavily criticized the central bank in the aftermath of the return to a contractionary monetary government, claiming that officials that were slow to respond to rising cost levels now are causing harm thru their overzealous attempts to manage inflation. Musk, who stated on social media earlier this summer that he has a “very awful feeling” about the economy, stated that Siegel is “clearly true.”
In an effort to revitalize the economy, Federal Reserve policymakers announced a 0% target interest rate and started purchasing government bonds from the market shortly after the lockdown-induced recession began.
The stock market opposes rate increase decisions because they have a detrimental impact on future economic activity. Investors responded positively to the latest announcement, however, because the Federal Reserve Governing board stated that officials “will take into consideration the cumulative tightness of monetary policy, the lags in which monetary policy impacts economic activity and inflation, and the economy and financial developments.” Previous releases did not incorporate the new language.
Musk, the CEO of SpaceX, Tesla, and Twitter, also projected that the global slump would extend until 2024. He stated that the first two enterprises are in “excellent situations” to survive the economic downturn.
In a recent earnings call for Tesla, the world’s richest man stated that China is facing “a sort of recession,” while Europe is also experiencing “a sort of recession driven by energy.” He believes North America is in “very excellent shape” and predicts that the Federal Reserve will eventually shift to a more moderate stance to inflation.