Philadelphia Federal Reserve President Patrick Harker

 The Federal Reserve President Patrick Harker spoke out about the interest rates and what he believes should happen. Harker believes that we have reached the point where we can keep the interest rates steady and let monetary policy take over. The Fed has done a good job right now with bringing inflation down while not having unemployment increase. If we push interest rates much higher and at the same aggression as the Fed has been, this could change and increase the unemployment rate. This increase in the unemployment rate could cause the economy to tank if the inflation rate does not decrease at the same rate. With making the decision to keep the interest rates steady the Fed now has to keep an eye on the incoming data that they are receiving and watch it for any signs that they need to change the interest rates. Using this data is going to be key in making sure the economy does not crash and acting fast enough to prevent any major shifts in the economy. 

Source:

https://www.cnbc.com/2023/10/13/philadelphia-fed-president-harker-advocates-holding-interest-rates-where-they-are.html 

Economic Impacts of the Israel-Hamas War

    Just over a week ago, an Islamic Resistance Movement called Hamas attacked Israelis in Gaza. Since then, the death toll has risen into the thousands, mostly civilians, with more being held hostage. As the conflict grows, concerns of increased worldwide involvement of other countries loom large. Militant groups from Lebanon and Syria may support Hamas in their fight, and sharper escalation could bring Iran into the conflict, forcing supporters of Israel into the war. While possible economic impacts take a back seat compared to the actual conflict, it is important to consider what may happen due to the war.

  In 1973, another conflict in the Middle East, the Arab-Israeli war, led to an oil embargo that lasted for years. Coming off the Russian invasion of Ukraine, the world economy may be unable to afford another major conflict in an oil-rich area. According to Bloomberg Economics, they estimate that a significant escalation in Israel could see oil prices rise to $150 per barrel and global growth drop to 1.7%. To put these numbers into perspective, a recession like this would result in $1 trillion off the world output. It is also essential to measure the possible changes to inflation that can come from changes in the oil supply. 

  To accurately forecast the world's economic state during and after the conflict in Israel, economists have to adapt their predictions based on the severity of the war. If the conflict stays within Gaza, there will be little economic impact on GDP and inflation, and oil prices will rise by $4 per barrel. Iran already supports groups there if the war breaks out and spreads to Lebanon and Syria. This expansion will double the oil price per barrel compared to a confined war and the previous inflation impact to +0.2 ppts. Finally, the worst-case scenario is a direct conflict between Israel and Iran. This regional escalation could result in a global recession as oil prices and inflation would rise tremendously. 

  To conclude, the war in Israel can become a global conflict, but it does not need to move to affect the world economically. Due to the Middle East's oil production, no matter the participants or the region in which the conflict takes place, the world will be impacted by this war. 

SOURCE : https://www.bloomberg.com/news/features/2023-10-12/israel-hamas-war-impact-could-tip-global-economy-into-recession#xj4y7vzkg