Elon Musk on Friday took to Twitter to comment on the economy and the rate outlook.
Recession In All Probability: If the Federal Reserve raises interest rates next week, the recession will greatly be amplified, the Tesla CEO said.
The Federal Open Market Committee, the monetary policy-setting arm of the central bank, will meet on Tuesday and Wednesday for a two-day meeting. A post-meeting policy statement will be released at 2 p.m. EST, followed by a press conference hosted by Chair Jerome Powell on Wednesday, Dec. 14.
The central bank has hiked rates by a cumulative 3.75 percentage points since it began tightening in March, with the last four of those hikes being aggressive 75 basis point increases. While the central bank reasoned that raising rates aggressively is warranted to bring inflationary pressure under control, a number of economists and market analysts have been calling for slowing the pace of rate hikes. The cumulative impact, according to them, will lead the economy into a recession.
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The tone of the November meeting’s policy statement turned a little less hawkish, and this was confirmed by the minutes of the meeting released in late November. This has revved up hopes for a policy pivot.
When one of Musk’s Twitter followers probed him about his opinion as to how long the recession will likely last, the billionaire suggested it could last at least until the first quarter of 2024. “Things probably start looking better in Q2 2024,” he said.
Fed Hike A Given: Most economists expect the central bank to raise the fed fund rate yet again at the December meeting, with most calling for a smaller increase of 50 basis points.
Even if the November consumer price inflation reading remains hot, the central bank is unlikely to go for a 75 basis-point increment, according to Cliff Hodge, chief investment officer at Cornerstone Wealth.
“We think the markets are too sanguine on rates after the first quarter and we expect Powell to take a more hawkish tone and for the dots to indicate higher rates for a longer period of time than what is currently being priced in by the futures markets — a “hawkish” step-down so to say,” he added.
Photo: Courtesy of Tesla Owners Club Belgium on flickr.
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