Fed is predicting a mild recession will hit the US economy. Unwavering inflation as well as emerging bank failures are leading to this prediction. In an aim to fight inflation, the Fed has increased interest rates 9 times in 2022. This increase is the highest it's been in 17 years. With high interest rates, it becomes more expensive to borrow, so it discourages people from borrowing money. On top of this, banks were limiting credit, so that they remain safe if danger is in the horizon. The limitation of credit also makes it harder for people to borrow. This tightening is usually a response to a recession which means banks are preparing now, so they aren't affected as deeply. If people can't borrow money, this will result in a decline in the growth of the economy. The article brings up a good point that the economy heading into a recession might solve high inflation.
https://www.usnews.com/news/us/articles/2023-04-27/how-will-we-know-if-the-us-economy-is-in-a-recession
1 comment:
I think it is reasonable to expect a mild recession in the future. With so much uncertainty in the economy and persistent interest rates hikes it will be interesting to see the future health of the economy. It will be interesting to see how consumers and banks are impacted in the event of a recession.
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