Recession Fears Grow as US Tightens Up Monetary Policy: Is Crypto the Solution?

There seems to be growing fears that a global recession will take place soon as the Federal Reserve tightens monetary policy to help bring down inflation. The U.S. economy shrank an annualized 1.4% in the first quarter of 2022. It is believed that one of the main reasons for this is a record trade deficit.

These events made crypto enthusiast AdLunam react in a tweet post saying that crypto is the solution,

Recession fears have been growing recently as the Federal Reserve tightens monetary policy to help cool down #inflation.

While the US economy shrank an annualized 1.4% in the first quarter, the weakness was primarily due to a record trade deficit.#Crypto is the solution! https://t.co/7V4aYJv31K

— AdLunam (@AdLunamInc) May 17, 2022

After years of somewhat loose policy, the U.S. Federal Reserve began raising its benchmark overnight lending rate in March this year. It then lifted the rate again this month by half a percentage point. This is the biggest hike in more than 2 decades.

Jerome Powell, the Fed Chair, signaled after the Federal Open Market Committee (FOMC) meeting on the 4th of May. He said that there will likely be similar increases throughout the year at upcoming meetings as the U.S. faces its highest inflation in an estimated 40 years.

A voting member on the FOMC, Loretta Mester, who is also the President of the Federal Reserve Bank Cleveland, said in an interview on Monday that a 0.75 percentage point hike later this year is still a possibility, and shouldn’t be ruled out. She added that the process of reducing the Fed’s asset holdings would take around two to three years.

Meanwhile, according to Elon Musk, the US economy is “probably” already in a recession. He went on to caution companies to watch costs and cash flows. Musk said at the All In Summit in Miami Beach that “These things pass and then there will be boom times again.” He also added that the recession may last for about 12 to 18 months.