Following the United Nations Conference on Trade and Development (UNCTAD) report that the U.S. Federal Reserve should suspend interest rate hikes, Arc Invest CEO Katherine Wood an open letter urging them to do so. Wood said the “unprecedented 13-fold increase in interest rates” has not only shocked the world, but is pushing the economy toward the risk of a “deflationary recession.”
Arc Invest’s Catherine Wood says the Fed’s last 75 bps rate hike was a “surprise,” and the letter notes that a 13-16x rise in benchmark bank rates is dangerous
Arc Invest CEO Catherine Wood issued an open letterto the Federal Reserve, noting that the central bank’s aggressive base rate hikes are dangerous. Wood’s letter states that “the Fed’s last decision to raise the FF rate by 75 basis points was surprising.”
Wood’s letter says that the Fed’s concept of limiting upstream price deflation is “likely to turn into downstream deflation.” Additionally, the ArcInvest CEO said that the Fed’s decisions are based on two “lagging indicators,” including inflation and employment indicators.
The CEO’s letter follows a recent report by the United Nations Conference on Trade and Development (UNCTAD), which also wants the Fed to stop raising interest rates. UNCTAD estimates that for every rate hike by the Fed, economic output in rich countries declines by 0.5% and in poor countries by 0.8% for three years It estimates that this will continue.
The complaints of both Wood and UNCTAD are also similar to the criticism the Federal Reserve has received from U.S. Senator Elizabeth Warren, a Democrat. Warren complained about the Fed raising the federal funds rate, and she further discussed the issue on CNN. Warren said at the time that she was “very concerned” that the Fed’s rate hike would fuel a U.S. recession.
ArcInvest’s Wood believes that the rate hike could trigger a deflationary spiral.” Could it be that the unprecedented 13-fold increase in interest rates over the past six months–which is likely to be 16 on November 2–has shocked not only the U.S. but the world and increased the risk of a deflationary collapse?” Wood asked in an open letter to the Fed released Monday.
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