President Powell’s testimony before Congress this week drew a disastrous economic outlook that will include the continued contraction in national GDP along with continued interest rate hikes.
During his testimony, it was evident that there was a subtle difference in his wording that was not characteristic and a dramatic change from his usual refined method. The president made it clear that the Federal Reserve has one goal above all others and is to reduce the level of inflation. They emphatically stated that Federal Reserve actions are likely to lead to a recession rather than a soft landing.
Yahoo finance captured its overall behavior in the most articulate way and said, “It said a recession caused by the Fed’s monetary tightening remains a‘ possibility. ’A smooth landing, with higher rates but an economy still healthy, it would be “very challenging.” “Getting. And Powell said the Fed’s fight against inflation was “unconditional,” meaning nothing will stand in its way. “
The Federal Reserve’s revisions to its monetary policy would no doubt contract the economy and cause a recession. A recession is defined as “a period of temporary economic decline during which trade and industrial activity decline, generally identified by a fall in GDP in two successive quarters.”
The latest GDP report revealed that the United States had an economic expansion that led to 6.9% GDP growth during the fourth quarter of 2021. If the first quarter GDP estimates are correct, it will indicate a decrease in real gross domestic product (GDP). for the first quarter of this year. The last appearance of a quarter-on-quarter contraction in GDP occurred during the second quarter of 2020. However, the following quarter (third quarter of 2020) revealed a sharp increase in national GDP.
That’s why next week’s report is so critical. On Wednesday, June 29, the BEA (Bureau of Economic Analysis) will release its first-quarter US GDP report. According to the advanced estimate released on April 28, “real gross domestic product (GDP) declined at an annual rate of 1.5 percent in the first quarter of 2022, according to the“ second ”estimate released by the “Office of Economic Analysis. Fourth quarter, real GDP rose 6.9 percent.”
Currently, there is a high probability that Federal Reserve actions will lead to a recession. The question is not whether the United States will enter recession or not, but when the recession will begin and how long the recession will last.
While a recession may stabilize the price of gold, and higher inflation certainly creates a bullish touch for the precious yellow metal, rising interest rates have become a major focus on the price. future of gold and has pressed for lower prices since March this year. Gold has fallen just over 12% from a high of $ 2,070 in March to the current price of gold of $ 1,828. While there appears to be strong support for gold at $ 1,800, depending on the aggressiveness of the Federal Reserve in terms of further rate hikes.
In addition to the GDP report to be released on Wednesday, the government will release its latest core inflation numbers on Thursday when the US PCE price index report is released.
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