Recently, the Federal Reserve Chairman of Minnesota said that recession is inevitable. Considering the fact that the United States is steadily increasing interest rates and economic activity is going down, a recession cannot be avoided. We know that economic activity has taken a hit as inflation touched 8.5%, lower than the expected 8.7%. So, in case we have a soft landing, it would be a lucky scenario, but most analysts and authorities say otherwise.
Market’s reaction to Fed’s statement
As soon as the chairman made the statement, the markets took a hit. Many investors panicked and sold their holdings, and the prices plummeted. This goes in line with the current market scenario as Bitcoin and Ethereum were unable to clear important price levels. They fell from $25k and $2k, respectively, and are now trading near $21.5k and $1.6k, respectively. Both Ethereum and Bitcoin have lost more than 10% of their monthly highs, and the recovery signs are also gone.
Bad news
Neel Kashkari, the CEO and President of the Federal Reserve bank, said that he is interested in the Volcker-Esque decision by the government. If the authorities impose this, then banks and financial institutions would not be allowed to make speculative investments. At the same time, they will not be doing short-term proprietary trading involving derivatives, securities, and commodity futures. This will be a major setback for the crypto industry as authorities still see it as a speculative investment.
Can a recession be avoided?
If the US wants to reduce inflation rates, then it has to raise interest rates aggressively. It has been doing so for the past 2 quarters now, and we have already seen an impact. Inflation is down to 8.5%. However, it is still very high, and the federal reserve needs to continue raising the rates. And this has a direct correlation with economic activity. So, a recession is likely.
Now, we have to wait for the numbers to see if the US GDP in the second quarter has also taken a hit or shown some indication of recovery. We just need to hope that Volcker-Esque is not implemented, which will worsen the entire situation.
What are your thoughts as Federal Reserve Chairman says that recession is inevitable? And do you think that the Volcker-Esque decision will be implemented? Let us know in the comment below. And, if you found our content informative, share it with your friends and family.
Also Read: Whales are moving ETH to exchanges: Is a dump coming before the merge?
