- Carey takes Australia to 270 in 2nd ODI against England after collapse
- Two Hezbollah leaders killed in Israel's Beirut strike
- Hungary Danube waters reach decade high after Storm Boris
- Bagnaia cuts Martin's MotoGP lead with Emilia-Romagna sprint win
- Jackson double fires Chelsea to victory at woeful West Ham
- Fiji beat Japan to lift Pacific Nations Cup
- Kasatkina to face Haddad Maia in Korea Open final
- S.Africa snowfall closes roads, strands motorists overnight
- Lawyers of women alleging Al-Fayed sex abuse receive over 150 new enquiries
- President Museveni's son backs Ugandan strongman for 7th term
- Norris quickest as Verstappen bounces back in Singapore practice
- Wallabies lament All Blacks' fast start
- Germany's Oktoberfest opens under tight security after attacks
- Environmental protesters block French cruise liner port
- Hezbollah in disarray after Israeli strike kills top commanders
- No place like home: Biden hosts 'Quad' leaders
- One dead, 7 missing as heavy rains trigger floods in central Japan
- Zelensky says no UK, US go-ahead to use long-range missiles
- New Zealand edge Australia 31-28 in Bledisloe Cup thriller
- Japan orders evacuations as heavy rains trigger floods in quake-hit area
- New Zealand pilot freed in Indonesia after 19 months in rebel captivity
- Hezbollah in disarray after Israeli air strike kills top commanders
- Leading climate activist released from Vietnam jail
- Ethiopians struggle with bitter pill of currency reform
- Sri Lanka votes in first poll since economic collapse
- Feminist author warns of abortion disaster if Trump wins US election
- US city of Flint still reeling from water crisis, 10 years on
- Arsenal's mean defence faces acid test to shut out Man City again
- Late surge lifts Thailand's Jeeno to LPGA Queen City lead
- DeChambeau says PGA's Ryder Cup decision 'just the start'
- Alcaraz defeated on Laver Cup debut
- Postecoglou embraces 'struggle' to make Spurs a success
- Nice hand 'ashamed' Saint-Etienne 8-0 Ligue 1 mauling
- Boeing CEO says ending strike 'a top priority'
- Stock markets mostly fall after Fed-fueled rally
- Harris slams Trump for hypocrisy on abortion as US starts voting
- Academy to host first overseas ceremony to honor young filmmakers
- No doctor necessary: US okays nasal spray flu vaccine for self-use
- Gurbaz, birthday boy Rashid lead Afghanistan to 177-run rout of South Africa
- Former delivery man Baldwin leads star names at PGA Championship
- Trump shooting: Secret Service admits complacency
- Can an ambitious Milei make Argentina an AI giant?
- Haiti, its suffering growing, in 'race against time': UN expert
- Ibrahim Aqil, the Hezbollah elite unit commander wanted by the US
- Chinese forward Cui signs NBA contract with Brooklyn Nets
- US Fed dissenter calls for 'measured' pace of rate cuts
- Guardiola tells players to lead change over workload as Kompany demands cap on games
- Norway limits wild salmon fishing as stocks hit new lows
- Top Hezbollah commander killed in Israeli strike on Beirut
- Rotterdam fatal knife attacker suspected of 'terrorist motive'
US recession fears grow as Fed plots aggressive course
The Federal Reserve has made clear it will come out guns blazing to battle the highest inflation rate in four decades, but that has sparked increasing fears their campaign will plunge the world's largest economy into recession.
The US central bank is facing a daunting task as it tries to engineer a "soft landing" that preserves growth while tamping down worrying price pressures against an uncertain global backdrop.
It will require "exquisite calibration," longtime Fed watcher David Wessel told AFP.
The United States has roared back from the Covid-19 pandemic, posting solid growth and record job gains thanks to massive government aid and aggressive stimulus from the Fed, which cut the benchmark lending rate to zero in March 2020.
But the rebound has hit multiple stumbling blocks, including renewed waves of the virus and shortages of key supplies and workers that sent prices surging. It must also now navigate the fallout from the war in Ukraine, which has caused a jump in oil prices.
The Fed last month raised interest rates by a quarter point in the first of a series of increases, and since then a chorus of officials -- including Fed Chair Jerome Powell and Governor Lael Brainard -- have signaled their openness to half-point rate increases, a more aggressive measure.
Wessel, director of the Hutchins Center on Fiscal and Monetary Policy at the Brookings Institution, cautioned that the Fed's tough stance means policymakers are "more likely to overdo it than under do it."
The Fed was caught by surprise at the speed with which inflation spiked late last year, initially driven by prices for cars and housing before spreading into other categories.
Consumer prices jumped 7.9 percent in February, the highest annual increase since 1982, but spending has nonetheless remained robust even amid new coronavirus variants.
Higher borrowing costs work by dampening consumer and business spending, bringing demand more in line with supply to lower prices.
Red-hot housing demand has already cooled as mortgage rates rose in anticipation of the Fed hikes, and data this week from the Mortgage Bankers Association indicate lenders are tightening credit availability.
- 'Very careful' -
Global stock markets have sagged in recent days amid the tough talk from Fed officials -- including from Brainard, who this week called fighting inflation "paramount."
Economists agree the Fed's stance is appropriate to prevent high inflation from becoming embedded, eroding purchasing power and eating into recent wage gains.
The situation raises the specter of the 1980s, when a wage and price spiral and oil embargo from OPEC member states prompted then-Fed chief Paul Volcker to crank up interest rates, which ground down inflation but caused a recession.
But Dana Peterson, chief economist at The Conference Board, said the current situation is "very different," notably because the economy and labor market are strong, and the Fed has built up its inflation-fighting credibility.
While the recession angst is understandable, "We need to give the Fed some credit," Peterson told AFP.
Policymakers are looking at all the factors "and really want to calibrate this" to achieve a soft landing, and she predicted the Fed "will do everything in its power, not to 'go too far.'"
But she cautioned that the central bank cannot control the supply shocks that have hit the economy, including the ongoing pandemic.
- Offloading bond holdings -
Economists are expecting several rate hikes this year and next, including multiple half-point increases, with the first of those likely coming in early May when the policy-setting Federal Open Market Committee (FOMC) next meets.
The Fed also has another tool to deploy this time, which is to reduce their massive bond holdings built up during the pandemic that were meant to ensure financial markets had ample cash to support the economy.
The minutes of last month's FOMC meeting released Wednesday indicated the $9 trillion balance sheet could be reduced by $95 billion a month, a much faster pace than in the wake of the 2008 global financial crisis.
But as an untested policy tool, it is unclear how that will interact with rate hikes.
"It's tricky," Wessel said, but given the strength of the economy "a mild and short recession... might be a tradeoff that policymakers are willing to make" to vanquish inflation.
N.Fournier--BTB