Former Kansas City Federal Reserve Bank President and CEO Thomas Hoenig discusses potential for a recession during his appearance on ‘Mornings with Maria.’
Despite inflation cooling in October, one expert is not ignoring the signs of a potential recession on the horizon.
“I think there is still a good risk of a recession and so does the Fed. And they’re walking this very fine line,” former Kansas City Federal Reserve Bank President and CEO Thomas Hoenig said during an appearance on “Mornings with Maria” Wednesday.
“I think we underestimated the extent of the fiscal stimulus that went on, not just the pandemic immediately, but the CHIPS Act, [and] the Infrastructure Act,” Hoenig explained when asked about the delayed effects of the Fed’s 11 rate hikes.
“These things are all stimulating the economy that has given us a very strong third quarter, for example… And I think that’s a big issue for the delay,” he continued.
The former Kansas City Fed Bank president highlighted the banking industry’s fragility as concerns regarding the Fed’s rate hikes continue to be vocalized.
Former Kansas City Federal Reserve Bank President and CEO Thomas Hoenig discusses the Fed’s handling of inflation. (Drago/Bloomberg via Getty Images/Michael Brochstein/SOPA Images/LightRocket via Getty Images/ / Fox News)
“I think people underestimate how fragile the banking industry is,” Hoenig stressed.
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“While you’re going to see some of these rate cuts, including a slowing economy, which is very likely to avoid a recession, the fact that the banking industry still is fragile and if they get the rates down, that will help the banking industry,” Hoenig expressed.
Following the Federal Open Market Committee’s meeting on November 1, the Federal Reserve decided to hold interest rates steady for the third time this year even as central bankers confront a surprisingly resilient economy and still too-high inflation.
As the Fed continues to handle inflation, Hoenig argues that rising unemployment could pose a “real danger” in the future.
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“They’re [Fed] aware of that. So, they’re not going to be raising rates, and they’re going to be under pressure to lower rates sooner, even with inflation above 3%,” Hoenig continued.
UBS managing director and senior portfolio manager Jason Katz says the Federal Reserve is in a ‘no-win’ position.
Looking towards the future, Hoenig speculates that a rate hike is “off the table” unless the U.S. sees a “very big surprise inflation.”
“I think, you know, rates are still high enough and the economy is still fragile enough that the risk of a recession remains next year, and that will accelerate the rate cut very quickly,” Hoenig stressed.
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FOX Business’ Megan Henney contributed to this report
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