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Musk: If Fed Raises Rates Again, Recession Will Be “Greatly Amplified.”

Elon Musk, the world’s richest man, has once again taken to Twitter to issue a dire economic warning. 

“If the Fed raises rates again next week, the recession will be greatly amplified,” he tweeted December 9, 2022. 

The recent tweet came after Musk, CEO of Tesla and Twitter, already called for the Federal Reserve to lower interest rates at the end of November in order to head off the possibility of a severe downturn.

“Fed needs to cut interest rates immediately,” Musk tweeted. “They are massively amplifying the probability of a severe recession.”

Musk has even gone so far as to suggest the Fed is purposely tanking the economy. In response to a video on Twitter featuring Wharton professor Jeremy Siegel, Musk responded that it is “obviously correct” that the Fed is purposely tanking the US economy. 

Musk has long forecasted the economy was heading toward a major recession, suggesting The Federal Reserve needs to stop raising interest rates, which it has raised by .75 basis points three separate times. In September, the Tesla chief warned that major Fed interest rate increases would risk deflation by raising rates too aggressively. 

Getting inflation below the Federal Reserve’s 2 percent target could prove an overshoot and  lead to a deep recession, the Federal Reserves Atlanta-based President Raphael Bostic said earlier this month. Federal Reserve chairman Jerome Powell warned in August the central bank was willing to inflict some “pain” on the economy in order to get inflation to drop. 

Ahead of the November Fed fiscal policy and monetary policy speech by Chair Jerome Powell, Musk called on the Federal Reserve to immediately lower interest rates, joining a chorus of investors and market observers eagerly seeking signs of the Feds reversal of direction thus far this year. The central bank has indicated it could soon cease raising interest rates, or perhaps even reverse them.

Musk complained about the excessive rate increases in Tesla’s Q3 earnings call in October. More recent comments made after his official acquisition last month of the social media company Twitter paint a more troubling picture for the coming downturn.

In a June email, called “pause all hiring worldwide,” Musk announced he had a “super bad feeling” about the economy and called for a 10 percent job cut at the electric carmaker. 

James Bullard, chairman of the Federal Reserve Bank of St. Louis, said during a November talk in Louisville, Ky., that he believes rates need to rise to the 5.0-5.25 percent range, although he called it the bare minimum needed to suppress inflation. 

The Fed has some work to do on getting contractionary, Bullard said in the MarketWatch interview, when he reiterated his belief that the Feds target policy rates must increase from their current levels of 3.75%-4.00% in order to be sufficiently contractionary enough to dampen inflation. 

Photo: Dan Smith

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