Newsmax Finance Insider David Stockman, former budget director under President Ronald Reagan, warns that the nation will plunge into recession by year’s end.
He said the Fed’s hawkish tone about hiking interest-rates is merely bluster.
“When has the Fed ever gotten it right about the economy? Did it see the crash coming in 2000? Did it see the housing bubble? Did it see the Wall-Street meltdown in 2008, or the bubble it’s creating now,” he asked Fox Business Network. “The answer is no…it has no clear view of the future.”
Expectations for a move in June or July have ticked up after minutes from the Fed's April meeting showed policymakers are likely to raise rates in June if the economy improves in the second quarter, labor market conditions improve and inflation remains on track to hit the central bank's 2 percent target.
Stockman said he expects a recession by the end of this year or next, which he forecasts will be followed by “massive panic and selling” on Wall Street, FBN reported.
“It’s hard to say what the black swan is, but right now, if we look at this economy, inventories are building up. If we look at transportation, for instance, rail traffic is down 10%, trucking traffic is down, manufacturing has been negative for months,” he said.
Meanwhile, Federal Reserve Governor Jerome Powell said a rate hike may come "fairly soon" if data confirm the economy is continuing to grow and labor markets are still tightening.
Powell said the economy remains on a "solid footing" and that he views ongoing job growth and evidence of rising wages as being more important than recent weakness in consumer spending and business investment, Reuters reported.
"There are good reasons to think that underlying growth is stronger than these recent readings suggest," Powell said in prepared remarks at the Peterson Institute for International Economics in Washington. "Labor market data generally provide a better real-time signal of the underlying pace of economic activity," he said.
"All told, labor market indicators show an economy on a solid footing," Powell said, adding that the U.S. central bank was on track to meet its full employment and 2 percent inflation goals. "If incoming data support these expectations, I would see it as appropriate to continue to gradually raise the federal funds rate."
Meanwhile, others agree with Stockman's gloomy scenario amid the search for clues about the Fed's monetary policy stance going into its June 14-15 policy meeting.
Forester Value Fund Portfolio Manager Tom Forester explained to CNBC that the central bank is actually preparing for an economic downturn.
"We actually think the Fed is really just trying to get ammo for the next recession," Forester told CNBC. "Right now, they're what? Twenty-five, 50 basis points? I mean, you've got no room right now if you do start heading into a recession," he said.
(Newsmax wire services contributed to this report).
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