Elon Musk warns of ‘tough sledding’ for US economy until next year
Billionaire Elon Musk warned of a difficult slog for the U.S. economy over the next year after recent turmoil within the banking system reignited fears over an imminent recession.
“Tough sledding until spring next year is my best guess,” the Tesla CEO and Twitter chief said in a tweet late Wednesday.
Musk was responding to a tweet that noted the Federal Reserve’s own staff economists are bracing for a mild recession this year after the collapse of Silicon Valley Bank and Signature Bank in early March.
“Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years,” Fed documents released on Wednesday said.
Musk – the wealthiest man in the world – has been a vocal pessimist about the state of the economy over the past year, repeatedly warning of severe fallout from rapid interest rate hikes.
In late March, Musk urged the central bank to reverse course in its inflation fight and cut rates.
“Fed needs to drop the rate by at least 50bps on Wednesday,” he said in a response to a tweet by hedge fund manager Bill Ackman that suggested the central bank needed to pause its rate-hike campaign.
Fed policymakers have already approved nine consecutive rate increases, lifting the federal funds rate from nearly zero to upwards of 4.75%. Officials have opened the door to a 10th increase at their next meeting in early May, despite upheaval in the banking system and signs of a slowdown in the economy.
Markets widely expect the Fed to approve another quarter-percentage point at the conclusion of their next meeting May 2-3.
A growing number of Wall Street economists anticipate the Fed’s actions will tip the economy into a recession next year. Hiking interest rates tends to create higher rates on consumer and business loans, which then slows the economy by forcing employers to cut back on spending.