Elon Musk Warns of Deflation, FED Official Admits Excessive Rate Increase!

The US Federal Reserve sets the monetary policy of the US and as a result controls the market movements.

The Fed maintains its hawkish stance despite the economic slowdown and rising unemployment. However, his aggressive stance could make Elon Musk’s warning of deflation a possibility.

Minnesota Fed Chairman Neel Kashkari admitted for the first time that the Federal Reserve may have gone too far.

Tesla and SpaceX CEO Elon Musk gave the Fed a dire warning. He stated that the hawkish stance of the FED and another sharp rate hike could result in deflation.

Cathie Woods of Ark Investments also believes deflation is a possibility due to the Fed’s overkill.

The Fed’s hawkish stance has many side effects. Unemployment claims reveal an increase in unemployment. Similarly, the World Bank warned that monetary tightening by the FED would lead to a recession in 2023.

Similarly, the United Nations states that a recession is imminent if central banks do not give up their hawkish stance.

But Elon Musk believes deflation is the more likely outcome.

Deflation and Recession

A recession is when a country’s total national income shrinks in successive quarters. This is typically accompanied by slow growth, low demand and rising unemployment.

On the other hand, deflation means that the prices of certain prices and services fall within a certain period of time. In a short time, deflation can help the economy due to low prices. But in the long run, deflation can hurt borrowers and investors.