WASHINGTON—
Despite a likely second straight quarter of expansion, the economy is widely expected to slow and then slide into a recession sometime in the coming months as increasingly high interest rates, engineered by the Federal Reserve, take a toll. The Fed’s rate hikes have inflated borrowing costs for consumers and businesses, from mortgages to auto loans to corporate credit.
But the good times for America’s workers aren’t likely to last. As higher rates make borrowing and spending increasingly expensive across the economy, many consumers will spend less and employers will likely hire less. Another threat to the economy this year is rooted in politics: House Republicans could refuse to raise the federal debt limit if the Biden administration rejects their demand for broad spending cuts. A failure to raise the borrowing cap would prevent the federal government from being able to pay all its obligations and could shatter its credit.