Economist Nouriel “Dr. Doom” Roubini is lauding the strength of the US economy despite the Federal Reserve’s tight monetary policies.
In a recent Bloomberg Television interview, Roubini says that the US continues to chug along while other major economies are starting to shrink.
“It has been surprising that given the amount of monetary tightening, some economies have been resilient. But the most resilient economy is the United States…
The Eurozone is going towards a shallow recession… China is a structural problem. So you kind of generalize what’s happening right now in the global economy. The US is probably the brightest spot right now.”
As the US economy flexes its muscles, Roubini says it will likely drive the Fed to continue hiking interest rates. A growing US economy suggests that there’s still a lot of liquidity in the system, which does not bode well for the Fed’s campaign to push inflation down to its 2% target.
“In the US, paradoxically, so far, in spite of the Fed hiking rates above 5%, the economy has grown recently above potential tight labor market, tight goods market. That’s good news in terms of achieving a soft landing, but it is actually bad news for the Fed because it implies that the Fed is not done yet.
It may have to hike once more or twice more. Eventually, the Fed funds rate might have a 6 handle (6%) rather than a five one (5%). And the more that happens, the more the risk that eventually there might be at least a short and shallow recession.
But the economic data recently have been reasonably strong even if it’s slowing.”
The Fed funds rate currently stands at 5.33%.