One ‘R’ word to rule them all
Rising levels of cash on the sidelines reflect the uncertainty of whether an economic recession or a recovery is most likely to materialise
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RECESSION or recovery? These two R words dominate the discussion of the economic outlook. Unusually, neither of these two words rules the current market debate.
On one hand, economists and central bankers note that constantly rising interest rates are supposed to contribute to the economic recovery by stamping out inflation. Federal Reserve Bank chairman Jerome Powell claimed in February: “We can now say for the first time that the disinflationary process has started.”
On the other hand, say a different group of economists, rising interest rates run the risk of tipping the economy into recession. Speaking at a Crunch Time for Prosperity conference, economist Nouriel Roubini said central banks will be forced to “wimp out and blink on inflation” to avoid causing economic and financial crashes.
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