A new research paper has determined that the Federal Reserve’s aggressive rate hikes to fight red-hot inflation, the worst in around 40 years, is likely to cause a recession.
The paper even signals that the Federal Reserve needs an inflation to happen to control inflation, according to some interpretations.
The paper comes as more economists are saying that the Fed will have to continue to raise interest rates even more than previously forecasted.
The Fed’s goal is to control inflation without a large hit to the U.S. economy, but it’s expected the 2% inflation target will be missed for years ahead.
The paper’s authors wrote, “based on past disinflation episodes in the United States and abroad, is that policymakers should expect that disinflation will be costly in terms of foregone output or employment. They find that all 16 of the large policy-induced disinflations in the four advanced economies they study were associated with a recession.“