Jim Cramer: 3 Fed Rate Hikes Would Cause Next Recession

Investment guru Jim Cramer warns that a few more Federal Reserve rate hikes, combined with the failure of the U.S. to forge a trade deal with China, could push the nation into a recession.

Cramer doesn't see a recession, at least anytime soon. But when asked by CNBC's Joe Kernen what would cause the next recession, Cramer said: "Three [Fed] tightenings and no trade agreement."

Cramer spoke as the list of economists and business elite predicting a downturn grows.

Economists see on average a 25 percent chance of a recession within the next 12 months, according to a Wall Street Journal survey released last month, the highest level since October 2011 and up from just 13 percent last year.

For his part, Noble laureate Paul Krugman said the U.S. 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 the Federal Reserve to 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. U.S. 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.

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