On Wednesday (06/15), FOMC met and announced a 75bps interest rate hike, bringing the central bank's lending rate to 1.5%-1.75%. This is the highest interest rate hike since 1994. In addition, FED also lowered the forecast for this year's economic growth from 2.8% in March to 1.7%. This clearly demonstrates FED's priority in curbing inflation ahead of recession risks.
However, from a macroeconomic perspective, risks of economic recession and uncontrolled inflation could lead to stagflation. In that case, the economy will take much longer to recover. The only U.S. stagflation lasted throughout the 20 years from 1965-1985, forcing Nixon to abandon the gold standard (Gold Standard).
In this week's macroeconomic article, Viet Hustler will analyze the impact of this interest rate hike on the credit market, FED's next directions, and the risks of recession as well as stagflation from the perspective of U.S. economic history.
