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Experts Say: 2017-03-18
Fed’s hike amid slow growth could lead to recession
Lance Roberts, chief investment strategist at Clarity Financial, makes the case that raising interest rates off ultralow levels during a period of slow economic growth triggers recession in the following three to nine months.
The Federal Reserve lifted its funds target range by 25bp to 0.75%-1.00% at its policy meeting on March 14-15.
At the same time, the US economy grew by only 1.9% on a yearly basis in the fourth quarter of 2016. In 2016, the growth came in at 1.6% after 2.6% in 2015.
“Outside of inflated asset prices, there is little evidence of real economic growth, as witnessed by an average annual GDP growth rate of just 1.3% since 2008, which by the way is the lowest in history since…well, ever,” Roberts wrote in his blog.
In its policy statement, the FOMC said it did not see any significant changes in economic conditions, only a slight improvement.
Lance Roberts expressed concerns over downside risks for the stock market as the result of the Fed's lifting of interest rates. The hike would spark higher borrowing costs for corporations and individuals, which in turn would trigger higher costs to buy a house or car and elevated costs of companies repurchasing their own stock, thus aggravating the lackluster growth.
Dallas Federal Reserve Bank President
Trader and NASDAQ listing manager
Professor of Economics at New York University
Former director of Office of Management and Budget under President Reagan
Professor of International Political Economy at Harvard University
The senior foreign-exchange and interest-rate strategist
Chief investment strategist at Clarity Financial
Trader, founder of Muddy Waters Research
Financial analyst and economist
Chief economic adviser at Allianz SE
Governing council member of the European Central Bank
Executive Director of UBS AG Wealth Management
Head of the European Commission
Premier of the State Council of the People's Republic of China
Germany’s Federal Minister of Finance
Ex-member of the Governing Council of the ECB
Former editor-in-chief of The Economist
Head of the Central Bank of China
Chancellor of Austria
Ex-Director of the Budget Office under the President of the United States
Investor, billionaire, the head of Janus Capital Group
Professor at NYU’s Stern School of Business
A former adviser to the president of the Dallas Fed
The Senior Research Scientist of the Institute of Europe RAS
Director of the Institute for Advanced Study in Warsaw
Billionaire, head of the Mexican Civilian Silver Association