Musk warns another rate hike will ‘much exacerbate’ recession; Things are probably looking better here

Elon Musk took to Twitter on Friday to comment on the economy and interest rate outlook.

Recession in all likelihood: If the Federal Reserve hikes interest rates next week, the recession will be greatly amplified, the Tesla CEO said.

The Federal Open Market Committee, the central bank’s monetary policy arm, will hold a two-day meeting on Tuesday and Wednesday. A post-meeting policy statement will be released at 2:00 p.m. EST, followed by a press conference hosted by the Chair Jerome Powell on Wednesday, December 14th

The central bank has hiked rates a total of 3.75 percentage points since tightening began in March, with the last four of those hikes being aggressive 75 basis point hikes. While the central bank argued that aggressive rate hikes were warranted to bring inflationary pressures under control, a number of economists and market analysts called for the pace of rate hikes to be slowed. They believe the cumulative impact will push the economy into recession.

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The tone of the November meeting’s policy statement turned somewhat less hawkish, which was confirmed by the minutes of the meeting released at the end of November. This has raised hopes of a political turnaround.

When one of Musk’s Twitter followers asked his opinion on how long the recession was likely to last, the billionaire suggested it could last at least into the first quarter of 2024. “Things are probably looking better in the second quarter of 2024,” he said.

Fed hike A given: Most economists expect the central bank to hike interest rates again at the December meeting, with most calling for a smaller hike of 50 basis points.

Even if CPI stays hot in November, the central bank is unlikely to target a 75 basis point hike Cliff HodgeChief Investment Officer at Cornerstone Wealth.

“We think markets are overly optimistic on rates after the first quarter and we expect Powell to adopt a more aggressive tone and the dots to show higher rates for a longer period of time than what futures markets are currently suggesting being priced in – a “hawkish” step-down so to speak,” he added.

Continue reading ‘Crazy Fed Rates’ and More: Elon Musk Explains Why Tesla Stock Has Lost Half of Its Market Cap in 2022

Photo: Courtesy of Tesla Owners Club Belgium on flickr.