will hike rates another 25 basis-points at the end of this month. Experts have warned high rates in the economy could push the US into a downturn, especially considering that the full impact of rate hikes takes months to be felt throughout the economy.
But central bankers will need to hike rates to cement their credibility on inflation, McCulley said, and another rate hike is unlikely to be the factor that pushes the US into a recession. That's because the lagged effect of monetary tightening could be easily be combated with rapid rate cuts if economic growth appears to be stagnating.
He predicted central bankers would begin to trim interest rates once they saw a cooler labor market and more disinflation in the economy. "I think the Fed's got a lot of room to make it happen. They don't have to stay high as long as they think if it turns out that the lags are nastier than we think," McCulley said.
Other commentators have turned more positive on the economy and markets as inflation continues to cool without sparking significant weakness in the labor market. Some say the