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Elon Musk Warns of Severe Recession if Fed Continues Rate Hikes

Billionaire entrepreneur Elon Musk has expressed concerns over further interest rate hikes by the US Federal Reserve, warning that they could lead to a severe recession. In response to former US Treasury Secretary Lawrence Summers' statement about a potential slowdown in the next 12 months, Musk tweeted that a mild recession is already underway. He pointed to the recent collapses of Silicon Valley Bank and Credit Suisse, as well as the failure of First Republic Bank, despite receiving $30 billion in rescue efforts from major US banks.

Musk argued that the Federal Reserve's data is lagging behind the current market conditions and warned that additional rate hikes could exacerbate the situation. He highlighted the potential delays in data reporting, such as the one-month lag in national employment numbers. According to Musk, he may have more real-time global economic data through his involvement with companies like Tesla, Starlink, and Twitter than anyone else.

The markets are anticipating another 25 basis points rate hike as the Federal Open Market Committee (FOMC) meets on May 2 and 3. The probability of a rate increase, according to the CME Fed Watch tool, stands at 87.3% against a 12.7% probability of rates remaining unchanged.

Musk's concerns reflect the broader debate around the Fed's monetary policy decisions and their potential impact on the economy. As an influential figure in the business world, Musk's remarks carry weight and contribute to the ongoing conversation about the direction of interest rates and their effects on financial markets and economic stability.

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