This ex-Fed official doesn’t foresee Warren’s ‘devastating’ recession

There’s probably a recession coming, but according to former Fed Governor Randall Kroszner, it won’t be so devastating as to send the economy into a tailspin.

“I think most indicators and most economists would suggest we’re not there yet,” Kroszner told Yahoo Finance Live (video above) of the outlook for a brutal recession at the hands of runaway inflation and aggressive rate hikes from the Fed.

Big names such as Sen. Elizabeth Warren (D-MA) have recently floated the idea of ​​a bad recession, fueled in part by the idea that the Fed is well behind the inflation-fighting curve.

“With Mr. Powell expected to announce another round of aggressive interest rate hikes, the Fed risks triggering a devastating recession,” Warren said in a recent Wall Street Journal op-ed.

Kroszner added that while this scenario is possible, it’s not the most likely outcome.

“I don’t think we’re going to have to have a devastating early 1980s type recession,” Kroszner said. “But of course there are a lot of shocks that could happen that have nothing to do with the Fed that could make things worse. But I don’t see that as my base case scenario.”

Certainly, the debate over whether the US economy is in or heading for a recession is well underway.

The Bureau of Economic Analysis (BEA) said last week that second-quarter GDP fell 0.9% as consumers and businesses cut spending due to high inflation.

This is the second straight quarter of economic contraction after GDP fell 1.6% in the first quarter, a trend seen by some as an unofficial indicator of recession.

Top economists have argued against the idea that a recession is looming by pointing to employment and income measures that remain very strong.

Other experts are not convinced by the more optimistic economic outlook.

“I wouldn’t be surprised if they [the National Bureau of Economic Research] delay the onset of the recession to late last year,” Vincent Reinhart, chief economist at Dreyfus Mellon, who spent 24 years in various research positions at the Federal Reserve, told Yahoo Finance Live. of the longest recessions on record.”

The story continues

Brian Sozzi is editor-in-chief and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

Click here for the latest stock trends from the Yahoo Finance platform

Click here for the latest stock market news and in-depth analysis, including events moving stocks

Read the latest financial and business news from Yahoo Finance

Download the Yahoo Finance app to Apple Where android

Follow Yahoo Finance on Twitter, Facebook, instagram, Flipboard, LinkedInand Youtube