Deepak Malhotra, Investor & Landlord, Cheney WA,  99004

Can the Fed Raise Rates without Causing a Recession?


Probably not.

8/9 is the Fed’s record on triggering a recession while trying to fix inflation

Nine times since 1961, the Fed has ratcheted up interest rate increases to try to control inflation. In eight out of those nine times a recession followed. The only “soft landing” occurred in 1994. That was when Newt Gingrich wrote his Contract with America. https://www.history.com/news/midterm-elections-1994-republican-revolution-gingrich-contract-with-america

As stated in an article in Politico, Fed rate-hiking cycles have a history of economic damage. One time was in 2000, when the Fed failed to raise rates until it was too late (like now) and cheap money had created the dot com bubble.

The Fed then pushed rates low during the recession they created, which resulted in a jump in house prices that ran through 2006 before crashing. The 2006 real estate crash crushed the net worth’s of homeowners, wiped out many banks and started a global financial crisis.

Whenever the Fed lowers interest rates or engages in Quantitative Easing, they blow up an asset bubble. When they increase rates, they cause a recession. It could be argued that we would be better off if they did not tinker at all.

https://www.politico.com/news/2022/03/29/federal-reserve-recession-inflation-rates-00021119