PEORIA, Ill. (WMBD) — New numbers show that the U.S. economy shrank during the first quarter of 2022. Now, some people are wondering whether Americans should be worried about a recession ahead.
The economy had an annualized decline of 1.4% in the first quarter of the year. The numbers for the second quarter will be released at the end of June.
Deutsche Bank is the first major global bank to forecast a U.S. recession. In a report that came out this week, the bank suggested that the federal reserve will raise interest rates so aggressively that it will hurt the economy.
With inflation persisting the way it is, many experts are beginning to raise concerns about a recession as the inevitable consequence.
Assistant Professor of Economics at Bradley University Colin Corbett said when there is a recession expected, the government will hand out stimulus, but he said the problem with stimulus this time around is it will lead to inflation. He said after the amount of inflation we’ve seen the past few months, the governments ability to give stimulus is limited at the moment.
Corbett said to fight inflation, the Federal Reserve can increase interest rates, which he said, “makes it more expensive for businesses and consumers to invest in major stuff, particularly housing.”
“Right now, the Federal Reserve has been sort of slowly ratcheting up interest rates in the hope of taming inflation, but also not starting a recession,” said Corbett. He went on to explain if the Federal Reserve hikes up interest rates too quickly, that can start a recession, too.
As of now, there are different ideas from experts on if the first quarter numbers are looking great or harmful.
“The important numbers in the economy, consumer spending, and business investment, were still strong. So, a lot of experts saw that number and thought that this is just kind of a blip. The economy is mostly continuing to look strong, but it is still a number that looks like negative economic growth,” said Corbett.
Corbett said he is optimistic that the country can avoid a recession, but that only time will tell.