MCALLEN, Texas (ValleyCentral) — As the U.S. continues feeling the financial impacts of covid, there is concern the country could be headed towards a recession.
ValleyCentral spoke with local economists on what we can expect in the coming months and where we are at right now.
Salvador Contreras, a professor of economics at the University of Texas Rio Grande Valley, said the Federal Reserve (Fed) is slowly raising interest rates to combat inflation levels.
“So we know there are high levels of inflation in the U.S. and so the Federal Reserve Bank of the United States has been signaling that they are going to increase interest rates in the economy to slow down the pace of price increases,” he said.
Teo Sepulveda, a professor at South Texas College, said the percentage of production of goods and services is no longer matching that of demand for goods and services, which is the money we spend.
Sepulveda said to get both entities to match, he noticed the Fed is slowing down spending by slowly increasing interest rates in loan-dependent sectors.
He said, “the interest rates to buy a new house is going to go up.” Furthermore, Contreras adds that it is “not just housing, it could also be for car loans, personal loans, credit cards.”
However, there’s a mix of conversations among economists focusing on the effects if the Fed pushes interest rates too high.
“People believe that the Fed is going to act more aggressively to try to obtain prices and so some people are worried that this is going to throw the U.S. into a recession,” said Contreras.
But experts like Contreras believe a recession is highly unlikely because there’s no indication economic activity is slowing down.
“The U.S. at the moment is running on all cylinders, the unemployment rate is at record lows, and I would say in the short term the risks are low that the U.S. is going into a recession,” he said.
Sepulveda thinks in the coming months the spending and production line should be matching again which would put off a recession.