The Federal Reserve has hinted that it will raise interest rates twice this year, likely by 50 basis points in total, which is quite minuscule. Nothing is concrete, though, as we saw this month, a time when nearly every economist predicted the United States central bank would hike rates.
See Also: The Boom is on – Federal Reserve says U.S. household wealth hits $85 trillion
With the Fed boosting rates, does this mean the U.S. economy is finally on its way to recovering from the economic collapse? Not necessarily so, says one contrarian investment guru.
Speaking in an interview with CNBC, Marc Faber, the editor and publisher of the Gloom, Boom & Doom Report, urged investors not to be fooled by Fed Chair Janet Yellen and her Federal Open Market Committee (FOMC). Why? Because the economy isn’t improving at all.
Faber told the business news network that “we could very well be in a recession in the U.S. within six months.”
Despite the Fed almost guaranteeing rate hikes, Faber doesn’t believe the talk at all.
“I doubt they would increase rates this year. I think they’ll keep rates at essentially zero,” he said. “Yellen said very clearly that the rate hikes are data-dependent, and data is globally getting worse, it’s not getting any better.”
He added that the U.S. economy isn’t performing well at all, and one of the big things is price inflation, spurred by the aggressive $4.5 trillion pumped into the economy through quantitative easing.
“One of the problems is affordability, and cost-of-living increases. For most households, the cost of living has gone up very substantially and so their spending power is limited,” Faber averred. “In addition to that if you look at tax revenues in the U.S., corporate tax as a percent of GDP is essentially flat. However, what has gone up a lot as a percent of GDP is individual taxes, so it has some negative impact on the economy.”
Faber noted that he’s maintained a negative view of the U.S. economy for quite a while. Prior to this prediction, he usually expected about a 20 percent market correction, but now “I would expect something more serious to occur.”
See Also: Federal Reserve Money Printing Madness: 345,000 Americans joined millionaires club in 2014
A recession is defined as two consecutive quarters of negative GDP growth. The first quarter of 2015 saw the U.S. economy contract by 0.7 percent. Many believe the second quarter numbers will be sluggish, but then return to superb growth in the third quarter.
Leave a Comment