Here’s why high interest rates haven’t caused a US recession

US interest rates have been at 23-year high for months, yet unemployment is low, stocks have reached repeated record highs and there’s no recession in sight.

As the Federal Reserve starts its March policy-making meeting on Tuesday, interest rates remain at a 23-year high, yet unemployment is low, stocks have reached repeated record highs and there’s no recession in sight. Economists are baffled. Whenever the Federal Reserve lifts rates to battle high inflation, the risk of a recession increases, and the US economy has typically fallen into an economic downturn under the weight of rising borrowing costs. But that has yet to happen this time around. America’s economy remains remarkably solid, despite the high interest rates. Economists say that’s partly due to the ultra-low mortgage rates that homeowners locked in during the pandemic, when the Fed slashed rates almost to zero; along with the generally healthy household finances of many Americans in recent years. Fed Chair Jerome Powell told CBS News last month that it was “critical” for the central bank to raise rates at the aggressive pace it did, even if it meant that Americans might feel some “pain.” “I was being honest in saying that we thought there would be pain. And we thought that the pain would likely come, as it has in so many past cycles, in the form of higher unemployment,” Powell said. “That hasn’t happened.”