US economy’s resilience is bad news for the Fed as per Economist

Even with the Federal Reserve’s stringent monetary policies, the US economy remains strong, according to economist Nouriel “Dr. Doom” Roubini.

According to Roubini, who was recently interviewed on Bloomberg Television, the United States economy keeps on trucking’ even while other big economies show indicators of contraction.

Some countries’ resilience in the face of significant monetary tightening has proven unexpected. However, the United States economy has shown to be the most robust.

The Eurozone is heading for a mild recession…There is a fundamental issue with China. So you extrapolate from the current state of the global economy.

Roubini predicts that the strengthening US economy will force the Fed to keep raising interest rates. The Federal Reserve’s efforts to bring inflation down to its 2% objective are unlikely to succeed so long as the US economy continues to expand, indicating that there is still an immense amount of liquidity in the economy.

Roubini argues, “Despite the Federal Reserve raising interest rates over 5%, the US economy has developed lately at a pace above its capacity, thanks to a tight labor market and a tight goods market. Though encouraging for those hoping for a gentle landing, this is poor news for the Federal Reserve since it suggests they have more work to do.

It might need a further one or two price increases. It’s possible that the Fed Funds Rate may eventually sport a 6-handle (6%). The economy may be declining, but recent numbers have been rather solid.”

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