Larry Kudlow, the former director of the National Economic Council in the Trump administration, said the United States is on the front-end of a recession. He said on Mornings with Maria following the release of Q 1's GDP numbers on Wednesday that he doesn't know whether the U.S. is in a recession yet, but he stressed that the economic outlook is not good. Kudlow pointed out the inflation problem, the collapse in consumer confidence, and the expectation that the Federal ReserveFederal Reserve is going to raise rates more than the central bank has already - in order to try and tame the price hikes.
The FOX Business host said shortly after it was revealed that gross domestic product GDP activity, the broadest measure of goods and services produced across the economy, declined at a worse than expected 1.6% annual pace in the first quarter, according to the Commerce Department's final reading. The figure is slightly higher than the department's first and second readings.
A recession is a contraction in GDP activity for two consecutive quarters.
In May, the Labor Department said earlier this month that the consumer price index, a broad measure of the price for everyday goods, including gasoline, groceries and rents, rose 8.6% from a year ago. The price of oil went up 1% in the one month period from April. The figures were higher than the 8.3% headline figure and 0.7% monthly gain forecast by Refinitiv economists.
The data shows the fastest pace of inflation since December 1981.
Many economists are wondering whether the Fed can achieve the elusive soft landing, the sweet spot between tamping down demand to cool inflation and sending the economy into a downturn. Hiking interest rates leads to higher rates on consumer and business loans, which slows the economy by forcing employers to cut back spending.
The Fed raised its benchmark interest rate by 75 basis points for the first time in nearly three decades, as policymakers intensified their efforts to combat red-hot inflation earlier this month.
The Federal Reserve Chairman Jay Powell wanted to make sure Americans that higher rates won't cause a recession and that tighter policy is necessary in order to tame prices.
Kudlow argued on Wednesday that the dismal economic picture is due to self-afflicted problems in the Biden administration, particularly over overregulate of the energy sector. He said there was a lot of blame to go around.
There is too much spending, too much regulation of business. The Federal Reserve was way behind the curve.