Glenn Hutchins, co-founder of the crypto-focused investment firm North Island, believes that the U.S. economy is headed for a recession next year
His comments come as the Federal Reserve (Fed) attempts to grapple with soaring inflation of 8.5% – its highest level in 40 years.
The comments from the investor came in an interview with CNBC’s Squawk Box.
“My base case for next year, 2023, is kind of a recession. I’m just starting to see some of the effects of that, leaning in that direction with some of the high-frequency data like money and bank accounts, credit card purchases, used car prices,” he said.
Hutchins: Fed determined to meet 2% inflation target
“I think the Fed is determined to get inflation down to their 2% target,” said Hutchins. “I think because of structural reasons in the economy now we’re likely to see persistent inflation higher than that.
“So I think we’re going to see higher inflation rates for a longer period of time. Those settings historically have been ones in which the Fed has pushed the economy into recession; it has not had the precision to be able to engineer a soft landing,” he added.
One way of battling inflation is to raise interest rates – an incredibly delicate balancing act. Raising rates too quickly can push an economy into recession, and the U.S. economy is already perilously close.
A recession is defined by negative growth across two consecutive quarters. The U.S. measured one-quarter of negative growth in Q1 of this year.
While Hutchins predicts a recession in 2023, it is certainly possible that the economy could slip into a recession far sooner.
Hutchins joins a growing list of individuals who are on the record stating that another recession lies in wait. For his part, Hutchins is skeptical that the Fed can stick a “soft landing” as it attempts to bring inflation down without crashing the economy.
Last month, the Bank of America issued its own warning of a recession shock, as the Fed tightened monetary policy. BofA chief investment strategist Michael Hartnett even went as far as to say that cryptocurrencies could outperform bonds and stocks.
Whatever the case, it certainly appears that there is going to be significant turbulence ahead.
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