Fed Rate Hike May Spark Recession, Experts Warn

The US Federal Reserve has raised interest rates, but experts say this move could lead to a recession.

According to Prof. Radhika Desai and an unnamed author, conventional central bank policy is based on a flawed assumption that inflation is caused by excess demand, rather than supply constraints.

The increasing cost of energy, food shortages, climate change, and damaged supply chains are all contributing to the current inflationary pressures, which can't be solved by raising interest rates.

Raising interest rates actually exacerbates the problem by forcing households to reallocate their constrained incomes towards essentials, leaving less to spend elsewhere.

Radhika Desai and her interlocutor argue that central banks are making profoundly political decisions, using unemployment as a mechanism for controlling inflation, which disproportionately affects the most vulnerable members of society.