(Kitco News) - The Federal Reserve won't be able to avoid a recession, even with aggressive rate cuts, warned Steve Hanke, Professor of Applied Economics at Johns Hopkins University.
"They are behind the curve, not ahead of the curve," Hanke told Michelle Makori, Lead Anchor and Editor-in-Chief at Kitco News.
The Federal Reserve cut rates by 50 basis points on September 18th - the first rate cut since 2020, with Chair Jerome Powell stating that the size of the rate cuts represents the Fed's commitment not to fall behind.
"Powell is implying they look at the daily data, they're on top of things, they know what's going on. This is just baloney. They've contracted the monetary supply, and as a result, later this year, or maybe as late as the early part of next year, we will enter a recession in the United States," Hanke said.
Hanke added that the Fed is flying blind because it ignores the M2 money supply contraction. In addition, at its September meeting, the Fed decided to continue reducing its securities holdings, with Powell noting that it is possible to have the balance sheet shrink while cutting rates.
To find out why Hanke views this as contradictory and why the Fed is missing the bigger picture, watch the video above.
For Hanke's macro outlook and a breakdown of how markets will respond, watch the video above.
This video is brought to you by Goldback --- Inflation-resistant, 24K gold currency. Learn where to get Goldbacks at https://www.goldback.com/
