Fed Faces Difficult Choice on Rates Amid Rising Recession Fears

Many economic indicators suggest a US recession could occur in the next 6-12 months. The Fed faces pressure to cut rates to prevent a recession.

Cutting rates now risks unleashing high inflation again, which could damage the economy for over a decade. The Fed should risk a small recession now to prevent this.

If a mild recession occurs, the consequences would be less severe than another bout of high inflation. The Fed's credibility would also be restored.

It's possible no recession occurs even if rates stay put, as market rates may fall on their own. The risks of cutting or not cutting are asymmetric.

Investors should reduce risk exposure or take positions based on whether they expect the Fed to cut rates or hold steady in the face of recession warnings.