Minnesota Fed Chairman Says Recession Is Inevitable, What’s Next?

One of the catalysts for the crypto winter was the Federal Reserve’s announcement of a rate hike to curb inflation, dragging the country into recession. As soon as the information reached the crypto community, investors and traders began a panic sell that sent crypto prices plummeting.

Even though the Terra crash exacerbated the situation, prices fluctuated every time the Feds met to discuss inflation-fighting measures.

But in July, crypto prices showed signs of recovery, but the trends didn’t last long. From August 22-24, Bitcoin is poised to lose its grip on the $21,000 price. Ethereum isn’t doing well either, as growth seems to be stalling.

The data shows that BTC lost almost 10% while ETH lost more than 11% instead of the expected recovery. But recent reports on Fed activity point to a more bearish trend.

According to the news currently trending, Federal Reserve Bank of Minneapolis CEO and Chairman Neel Kashkari has revealed that he is interested in a Volcker-Esque move by the federal government.

The Volcker Rule protects bank customers by prohibiting financial institutions from making speculative investments. In addition, it prohibits banks from engaging in short-term proprietary transactions involving derivatives, securities, commodity futures, etc., with their accounts.

There has been criticism of the Volcker Rule, and even President Donald Trump has ordered an overhaul of financial system regulations, including VR.

Can the feds create a recession to curb inflation?

Inflation control in the United States is within the power of the Federal Reserve. The organization publishes the consumer price index to assess the level of inflation in the country. Unfortunately, the June data was very strong, prompting the Fed to raise interest rates as it wreaked havoc on the financial market.

Fortunately, subsequent CPI data did not cause the same panic. Instead, the July CPI did not shake the stock market as expected. But everyone expected inflation to come down. Instead, in August, CPI data came in below expectations, driving prices higher in the crypto market.

Minnesota Fed Chairman Says Recession Is Inevitable, What's Next?
Cryptocurrency Market Sideways Trends | Source: Total Crypto Market Cap at TradingView.com

But if the feds adopt the Volcker-esque themselves, things will go worse than the initial experience. The world is waiting for the second quarter of US GDP. Unless it shows signs of recovery, the data will point to two quarters of negative growth in the United States.

The data already meets the criteria for a technical recession, which could lead to a tougher approach. If the feds continue with their aggressive approach, the outcome could lead to more price drops.

Recall that Paul Volcker was the chairman of the Federal Reserve who stopped inflation in the 1920s. According to history, the economist created two massive recessions to rein in spending and bring down inflation. But then the recession was brief to bring down the growing crisis.

This approach indicates that the Federal Reserve’s control over the recession gives it the power to tip the balance either way. But even if it is possible, the body is unlikely to make rash decisions that could affect the economy.

Featured image from Pixabay, charts TradingView.com

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