The Federal Reserve could still avoid creating a severe economic downturn in the U.S. with its interest rate hikes, a chief J.P. Morgan Asset Management strategist said and Fortune reported. But it probably won’t because its leaders are convinced, without having said so publicly, that a recession is the only cure to rampant inflation. “If the window is narrowing, it’s because the Federal Reserve is shutting the window,” David Kelly, chief global strategist for J.P. Morgan Asset Management, told Insider in an interview released Tuesday. “The economy is very much at risk of the Fed pushing it into recession quite unnecessarily.” Hoping to tame roaring inflation by cooling the hot economy, the Federal Reserve has approved six interest rate hikes this year. The strategy may ultimately reduce prices, but it will, according to many bankers and economists, likely set off a recession next year. Last week, the Fed approved its most recent rate hike, and signaled it’s open to more, even as inflation shows signs of receding. Kelly isn’t alone in saying inflation may already be on the wane. U.S. annual inflation may already be down to as low as 4%, economist Paul Krugman wrote, citing indicators that take longer to show up in economic measurements such as slowing wage growth and declining rental prices. Some economists maintain that a “soft landing,” whereby inflation subsides without a significant economic downturn, is possible, as the U.S. could navigate a “narrow path” to avoid a recession next year.
