The road to recession: Attempting to time the next economic downturn
With the struggles from the Global Financial Crisis (GFC) still fresh in policymakers' minds, the 2020 COVID-19 recession was fought proactively, with every tool available. After trillions of dollars in fiscal and monetary stimulus, protracted economic crisis was avoided. However, policy actions worked too well, supercharging aggregate demand before supply could fully heal and pushing inflation to fresh 40-year highs. The United States Federal Reserve (Fed) is now embarking on a mission to reassert price stability without ending the post-COVID expansion. For the Fed to bring inflation down from current levels that are more than quadruple the 2% target, without triggering a wave of economic pain, will be extraordinarily difficult. As such, just two years into the post-COVID recovery, investors are already discussing the risk of recession. Download the latest bulletin from Principal Global Insights to read more of our perspectives.