As the Federal Reserve attempts to control inflation with a series of swift interest rate hikes, a frequently ignored economic indicator revealed on Friday that the U.S. economy is either already in or headed for a recession.
The Leading Economic Indicators index from the Conference Board indicated that things continued to get worse in October, falling 0.8% from the prior month. This comes after a decrease of 0.5% in September.
"The U.S. LEI fell for an eighth consecutive month, suggesting the economy is possibly in a recession," said the senior director of economic research at The Conference Board.
The downturn is a result of both a protracted downturn in the housing market and consumers' worsening outlook due to higher interest rates and persistently high inflation.
As the Fed raises interest rates at the fastest rate in three decades to keep up with escalating inflation, there is an increasing expectation on Wall Street that this will lead to an economic downturn.
This month, officials approved a fourth consecutive 75-basis-point rate increase, bringing the federal funds rate to a range of 3.75% to 4%, which is close to restrictive levels, and they gave no indication that they would stop raising rates.
A worrying development is that the Fed's rate increases to date have not been able to control inflation: The consumer price index increased 7.7% from the prior year in October, according to government data released this month, approaching a 40-year high.
That suggests that the Fed will need to maintain its aggressive course, increasing the likelihood that it will stifle consumer demand and raise unemployment.
"Let me say this," said Fed Chairman Jerome Powell. "It is very premature to be thinking about pausing. When people hear lags, they think about pauses. It's very premature, in my view, to talk about pausing our rate hikes. We have a way to go."