Big banks are predicting that an economic downturn is fast approaching. More than two-thirds of the economists at 23 large financial institutions that do business directly with the Federal Reserve are betting the U.S. will have a recession in 2023. Two others are predicting a recession in 2024. The firms… cite a number of red flags: Americans are spending down their pandemic savings. The housing market is in decline, and banks are tightening their lending standards. … The main culprit is the Federal Reserve, economists said, which has been raising rates for months to try to slow the economy and curb inflation. Though inflation has eased recently, it is still much higher than the Fed’s desired target. The Fed raised rates seven times in 2022, pushing its benchmark from a range of 0% to 0.25% to the current 4.25% to 4.50%, a 15-year high. Officials signaled in December that they plan to keep raising rates to between 5% and 5.5% in 2023. Most of the economists surveyed by The Wall Street Journal expect the higher rates will push the unemployment level from November’s 3.7% to above 5%—still low by historical standards, but that increase would mean that millions of Americans would lose their jobs.
Source: Wall Street Journal
