In this way, the experts advanced their estimates for the end of the year at least three months, which are more adjusted to the prices of interest rate futures.
While the central bank, led by Jerome Powell, is likely to cut its moves to a quarter point in the second half of this year, the fed funds rate is now expected to end 2022 at 2.00%. -2.25%, 50 basis points higher than the median forecast in a survey conducted last month.
“Given the shift in official commentary and inflationary pressures visible across the economy, we believe the Federal Reserve will raise interest rates by half a point at the May, June and July policy meetings,” said James Knightley, Chief International Economist at ING.
In this context, respondents pointed to an average one in four chance of a U.S. recession over the next 12 months, rising to 40% over the next two years. The bond market is already showing signs of recession concern.
With the Fed apparently feeling the need to ‘catch up’ to regain control of rising prices and inflation expectations, a rapid pace of aggressive interest rate hikes increases the odds of a policy misstep. monetary policy that could be enough to send the economy into a recession,” Knightley added.
Growth forecasts were lowered across the board. The economy is expected to grow 3.3% and 2.2% this year and next, respectively, compared to 3.6% and 2.4% forecast last month.
It is worth remembering that inflation, measured by the Consumer Price Index (CPI), reached a maximum of 7.9% last quarter, and an average of 6.8% this year.
The US labor market is expected to tighten further after unemployment fell to 3.6% last month, only slightly above pre-pandemic levels and what is projected to be the average in 2022.
Economists estimate that the unemployment rate will average 3.5% next year and remain at that level in 2024, which roughly matches the Fed’s own optimistic view and is inconsistent with the concern of those surveyed about the recession.
Source: Ambito
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