12:18 p.m. ET, March 20, 2024
Here’s why high interest rates haven’t caused a US recession
Frederic J. Brown/AFP/Getty Images
Whenever the Federal Reserve lifts rates to battle high inflation, the risk of a recession increases, and the US economy has typically fallen into an economic downturn under the weight of rising borrowing costs. But that has yet to happen this time around.
America’s economy remains remarkably solid — despite high interest rates.
Economists that’s partly due to the ultra-low mortgage rates that homeowners locked in during the pandemic, when the Fed slashed rates almost to zero; along with generally healthy household finances of many Americans as the country entered Covid lockdowns.
Fed Chair Jerome Powell told CBS News last month that it was “critical” for the central bank to raise rates at the aggressive pace it did, even if it meant that Americans might feel some “pain.”
“I was being honest in saying that we thought there would be pain. And we thought that the pain would likely come, as it has in so many past cycles, in the form of higher unemployment,” Powell said. “That hasn’t happened.”
While it’s a phenomenon that has perplexed many economists, it has, more importantly, spared Americans so far from the unforgiving economic pain of a recession.
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2024-03-20 18:16:22