Most economists have put the probability of a recession in the United States at 61%. The coming year is going to be difficult for the US and global economies, the Wall Street Journal said, citing its latest quarterly survey.
Despite signs of cooling inflation in the country, experts anticipate it tipping into a recession amid further interest rate hikes by the Fed. The US economy is expected to shrink in 2023.
Initially, the Fed intended to resort to a soft landing by slowing down inflation and reducing a small number of jobs. This measure is necessary to avoid a recession. However, most analysts are confident that this method is ineffective.
According to Deutsche Bank economists, there is still "a long way to go" for the US central bank to stabilize the situation. They believe that the regulator will keep monetary policy tight to rebalance the labor market and ensure price stability. However, such a strategy paves the way to a rise in unemployment and a recession. Notably, the Fed raised interest rates seven times in 2022. The latest increase in December brought the policy rate to a 4.25%-4.5% range.
In the 12 months through December, US consumer prices increased by 6.5%, notching the lowest level since late 2021. That followed a 7.1% rise in November, the Labor Department reported. In June 2022, the annual inflation rate peaked at 9.1%. Analysts polled by the WSJ predict that the CPI will return to 3.1% by the end of 2023 and 2.4% in 2024.
US GDP is forecast to expand at a 0.1% annualized rate in the first quarter of this year and to contract by 0.4% in the second one. Also, the median prediction suggests no growth for the third quarter of 2023 and a 0.6% advance for the fourth quarter.
