BlackRock warns that Fed rate hikes may cause economic slowdowns

Yahoo Finance markets reporter Alexandra Semenova joins the Live show to break down statements on how the Fed's raising interest rates to combat inflation may in turn spark an economic slowdown.

Video transcript

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DAVE BRIGGS: Blackrock out with a new note warning the Fed's rate hikes are addressing the politics of inflation and will have unintended economic consequences.

SEANA SMITH: Alexandra Semenova joins us now with the details. And Alexandra, what can you tell us about this?

ALEXANDRA SEMENOVA: Well, guys, strategists at BlackRock are suggesting that a recession now appears to be an unavoidable outcome of the Fed's fight against inflation. And one of the key arguments that they make is that the inflation that we're currently experiencing is the cause of an incomplete restart to the economy after the pandemic, and not the overheated demand that many people think it is. And for that reason, by hiking rates in response to the latter, they are responding to the politics of inflation.

Fed Chair Jerome Powell, in congressional testimony today, conceded for the first time that the rate hiking campaign may result in a recession, but he has severely downplayed that possibility. And he still believes that there's a possibility of a soft landing, which BlackRock said is just not a possible outcome at this point.

DAVE BRIGGS: So many dire predictions of recession in the next 12 to 18 months, including 60% of CEOs on the Conference Board. Alexandra Semenova, nice to see you. Thank you so much.

ALEXANDRA SEMENOVA: Nice to see you.