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Inflation's Shadow in Times of Recession
In the event of a recession, if the government implements tactics similar to those used during the COVID pandemic—by distributing financial aid and the Federal Reserve supports this with quantitative easing and lowering interest rates—there is a risk that inflation expectations could increase. Consequently, while short-term interest rates might decline sharply, long-term rates may decrease at a slower pace, stabilize, or even rise if inflation concerns resurface.