The US economy is facing a rare and complex situation, according to Piper Sandler’s head economist. Large companies have either benefited or sustained themselves amidst high interest rates, while consumers are feeling the financial strain. The economist has predicted a 53% chance of a recession, which she believes is necessary to address inflation.
Nancy Lazar, the chief global economist at Piper Sandler, revealed that the US economy is currently navigating a “bifurcated” state that has only occurred twice before, both times leading to a recession. This challenging economic situation was observed during the energy crisis in 1978-79 and the Great Recession in 2008. Some are thriving due to higher interest rates, while others are struggling to cope with the price hikes, creating a divide.
Large corporations are benefiting from increased interest rates, favorable financial conditions, stock market rallies, and government support. On the other hand, consumers are facing financial difficulties with rising debts, high interest rates, and inflation eroding their wage increases. Lazar emphasized that the higher interest rates are essential to address excesses and inflation, eventually leading to a recession.
Lazar stressed the importance of a recession to address the ongoing inflation issues. She believes that without a recession, there is a risk of continued excessive spending and rising prices. The economist highlighted the need to strike a balance between controlling inflation and avoiding a recession, expressing more concern about persistent inflation.