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What does the U.S. have to do to avoid a recession?

Is the U.S. economy headed into a recession? The question comes as consumer prices have climbed to their highest point in more than three decades—and as worries over inflation prompt a response from central banking authorities. The looming question also comes amid continued supply-chain disruptions brought on by the COVID-19 pandemic, which have been exacerbated by Russia’s war in Ukraine. A recessionary period, defined as two or more consecutive quarters of negative GDP growth, may be inevitable in the coming months as the Federal Reserve plans to raise interest rates in an effort to crack down on inflation, Northeastern economists say. 

“Unfortunately, we are staring down the barrel of a recession,” says Nancy Kimelman, assistant teaching professor in economics at Northeastern. That’s because the federal government’s aggressive response to soaring unemployment at the onset of the pandemic has accelerated inflation, she says. Those response measures, which included lowering interest rates to zero and stimulus funds to struggling Americans, among other policies, ultimately created more demand in the economy—and in particular, in the labor market—than can be sustained. 

Continue reading at News@Northeastern.

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