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Tracing the descent into hell for the American economy

Tracing the descent into hell for the American economy

Heading into a recession This is the US after the Federal Reserve approved a quarter-percentage-point increase in interest rates at the end of its two-day meeting this week.

This is the tenth increase approved since March 2022, which will put the benchmark interest rate between 5% and 5.25%.

New bombing of the waterline of the US economy

With this action, the Fed is once again raising the cost of credit for consumers and businesses. As a result, there will be a further increase in interest rates on mortgages, car loans and the like, which may in the medium term reduce the amount of money available for consumption.

As a precursor to this interest rate hike, the First Republic Bank collapsed, and on May 1, US President Joe Biden promised to protect American depositors.

Regarding this matter, which has already become a downward spiral for US banks as a result of raising interest rates, the head of Ekai Center Consulting, Adrián Zelaia, notes, “There were clear mistakes in the picture on the part of the central banks when he said with certainty that the banking crisis was over, And the next day a new bank fell.

The analyst qualified: “It is true that these banks are not going down because of a solvency crisis, but rather because of a liquidity crisis caused by interest rate adjustments, anyway.”

“If, as expected, increases in interest rates start to create a recession in the coming months, that recession will already have an impact from an insolvency perspective. Therefore, it cannot be ruled out that at any time we have a banking crisis from a solvency perspective, and it has not been From a liquidity perspective, and I think it would be a natural thing in this context that everyone expects, a rise in the interest rate will lead us to a recessive context in Europe and the United States,” concluded Adrian Zelia.

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With information from Sputnik.