High inflation and low unemployment, alerts of the possibility of a recession in the United States

In his article, Serrano highlights that in the face of rising interest rates, one of its effects is recession, as this makes corporate credit, mortgages and consumer loans, among others, more expensive and thus more complex to access and pay for both individuals and businesses.

The economist explains that in 2021 before the rate hike, the average mortgage rate was 2.6% while the level is now 5.9%. This effect slows down the sale of new housing, slows down the pace of construction, which leads to fewer jobs in the sector and lower consumption. On the other hand, in consumer credit, fewer people will take out loans for durable goods, motivating other sectors, including those with more purchasing power, to be more careful with their money and thus spend less.

The article mentions a similar incident that occurred in the early 1980s when inflation reached levels of 13% and the US Central Bank took the decision to raise interest rates to a range close to 20%. This increase led to a recession as the unemployment rate in the northern country reached more than 10%. This effect on the economy led to a crisis that cost President Jimmy Carter re-election and undermined the Fed’s credibility with investors and the general population.

The analysis identifies US inflation currently at 8.6% and unemployment at 3.6%, which means that the cycle of increases should be more pronounced than that observed in the mid-1990s, warns that the situation could lead to a potential banking crisis and that all this combination Of the economic variables that would affect the economic growth of Mexico.

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Aileen Morales

"Beer nerd. Food fanatic. Alcohol scholar. Tv practitioner. Writer. Troublemaker. Falls down a lot."

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