Navigating the Economy: How the Federal Reserve is Fighting Inflation and Avoiding Recession

The Federal Reserve’s attempts to combat inflation and keep it within its target of 2%–3% has led to seven successive rate increases in the past year.[0] While effective, these hikes have prompted fears amongst economists of a potential recession, as the Fed risks pushing the economy too far, leading to job losses.

Retail sales rose 3% in January, according to the Commerce Department, and the unemployment rate is at its lowest since May 1969.[1] Yet the decline in the Philly Fed index and the poor momentum in the US housing market have sparked recession fears amongst investors.[2] The higher-than-expected Producers Price Index, Wednesday’s retail sales, and the fall in today’s initial jobless claims suggest that the fight against high inflation is still ongoing.[2]

The 10-Year US Treasury yields are climbing, putting further pressure on longer-duration assets, while oil prices are trading lower due to Fed hike fears.[2] Gold investors are hanging on to those recession signals, but with rate signals blowing in the wind, it seems the appetite to add to current positions is small.[3]

In an ideal scenario, inflation keeps trending downward without increasing unemployment.[4] Prices stabilize and we avoid a recession.[4] Lower inflation expectations can reverse the dynamic and help cool inflation.[5]

It is clear that the Federal Reserve must act cautiously to ensure the economy does not slip into recession. The Fed must continue to raise rates, but at a steady rate, to ensure inflation is kept within target.[0] We must watch the situation closely to ensure the Fed does not push the economy too far.

0. “Question of the month: How do you maneuver uncertainty in today’s economy? – by Alan Doyle” New England Real Estate Journal Online, 10 Feb. 2023,

1. “Deep Recession or Soft Landing? Where Is the U.S. Economy?” NBC 5 Dallas-Fort Worth, 16 Feb. 2023,

2. “In a recession’s shadow” FXStreet, 16 Feb. 2023,

3. “U.S. Stocks Lower on Macro-Heavy Day Amid Recession Fears”, 17 Feb. 2023,

4. “Is the economy improving? Here’s an explainer, and what to know about debt, jobs, inflation and recession fears.” msnNOW, 13 Feb. 2023,

5. “Cautious but steady consumers buoying hopes for U.S. economy” Toledo Blade, 16 Feb. 2023,