David Kelly Warns Fed: Stop Raising Rates or Risk a Recession

• JP Morgan Chase Asset Management Chief Global Strategist David Kelly predicts the economy may go into recession if the Federal Reserve continues to raise interest rates.
• Kelly claims that the Fed has “won” its war against inflation and should now stop raising rates to avoid a recession.
• He suggests that the Fed should stop raising rates after the February meeting, when the benchmark rate is expected to hit 5%.

JP Morgan Chase Asset Management Chief Global Strategist David Kelly has urged the Federal Reserve to stop hiking interest rates if they want to keep the U.S. economy intact. Kelly believes that the Fed has “won” its war against inflation and should now shift focus to avoiding a recession.

In an interview with Bloomberg on Thursday, Kelly predicted that the Fed will continue raising interest rates beyond February, and into their March and May meetings. These raises, predicted at 25 basis points each, would bring the Fed’s benchmark rate to over 5%. Kelly believes that this level is too high, and could potentially tip the economy into a recession.

Kelly suggests that the Fed should instead focus on “building a little bit of a cushion in the economy,” as a recession could be around the corner. He noted that the current economic growth rate is “just about as fast as it can be without generating inflation” and that any further rate hikes could push the economy into a recession.

Kelly further warned that rate increases could have a long-term negative impact on the economy, noting that “the Fed has to be careful that it doesn’t raise interest rates so high that it actually causes a recession…. It’s not clear that we need more interest rate increases at this point.”

In conclusion, David Kelly has cautioned the Federal Reserve to stop raising interest rates past February, in order to avoid tipping the U.S. economy into recession. He believes that the current economic growth rate is already at its maximum, and that any further rate hikes could cause long-term damage to the economy.