Nobel laureate Paul Krugman said the US economy may be heading into a recession at a time when the Federal Reserve doesn’t have the firepower to properly combat a slump. “There seems to be an accumulation of smaller problems and the underlying backdrop is that we have no good policy response,” he said in a Bloomberg Television interview in Dubai.
The headwinds facing the economy prompted Federal Reserve this month to halt its interest-rate hiking cycle, which Krugman said was never “grounded in the data” to begin with. “Continuing to raise rates was really looking like a bad idea,” he added. Krugman isn’t alone in seeing a gloomy outlook for the world’s biggest economy. US chief financial officers in a Duke University survey published in December overwhelmingly said they expect a recession within two years. “I wouldn’t be as definitive, but it seems pretty likely,” Krugman said.