The projection will be unpleasant news for Biden, who has repeatedly said that the US will avoid a recession and that any slowdown would be “very slight.”
However, the tightening of financial conditions, the persistence of inflation and expectations of a Federal Reserve tougher on monetary policy by raising rates increases the risk of economic contraction.
The Bloomberg Economics model uses 13 macroeconomic and financial indicators to predict the probability of a recession over horizons of one month to two years. While the probability of a recession within 12 months reached 100% according to the model, the odds of a recession occurring sooner also increased. The model forecasts that the probability of a recession 11 months from now is 73%, up from 30%, and the 10-month probability rose to 25% from 0%.
According to Bloomberg Economics, the deteriorating outlook is due to a generalized worsening of the economic and financial indicators used in the model.
Fitch’s Forecast
The Fitch rating agency cut growth forecasts USA for this year and next and will warn on Tuesday that rising interest rates Federal Reserve and inflation will push the US economy into a 1990-like recession, according to CNN.
Fitch expects US GDP to grow just 0.5% next year, compared to 1.5% in the agency’s forecasts in June, CNN reported, basing its information on a report by the rating agency.
Fitch economists expect the recession in the country to be fairly mild and the unemployment rate to rise from the current 3.5% to 5.2% in 2024, implying the loss of millions of jobs, which notwithstanding they will be less than those of the previous two recessions, according to the report.
According to Fitch, high inflation “will prove to be too great a drag” for household income next year, as it will reduce consumer spending and cause a decline during the second quarter of 2023, the report added.
US consumer prices increased more than expected in September and underlying inflationary pressures continued to grow, reinforcing expectations that the Federal Reserve will make a fourth interest rate hike of 75 basis points next month.
Inflation is well above the Fed’s 2% target, despite moderating as supply chains loosen and oil prices retreat from spring highs.
Source: Ambito
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