Navigating the Storm: Understanding the U.S. Recession and Its Implications
The US economy will likely fall into recession later this year due to the crisis in the banking sector, according to the minutes of the latest Federal Reserve Policy meeting released last Wednesday.
According to the minutes of the Federal Open Market Committee’s March 21–22 meeting, several policymakers of the US central bank last month considered pausing interest rates after the failure of two regional banks and a forecast by Fed staff that banking sector stress would tip the economy into recession.
By March 2024, it is projected that there is a probability of 57.77 per cent that the United States will fall into another economic recession. This is an increase from the projection of the preceding month where the probability peaked at 54.49 percent. The U.S. recession probabilities are predicted a year in advance by using the difference between 10-year and 3-month treasury rates.
US consumer price inflation climbed 0.1 per cent in March, an improvement from the 0.4 per cent rise in February, as the cost of gasoline declined; but high rents kept the underlying inflation pressures high.
As of May 2023, the US economy is generally considered to be in a period of expansion. GDP growth has been relatively strong, with the most recent estimate for Q1 2023 showing an annualized growth rate of 6.4%. Unemployment has also been falling, with the most recent estimate showing a rate of 4.2%.
However, there are also some concerns about the potential for a future economic downturn. One factor that has been causing some worry is inflation. Inflation has been higher than expected in recent months, and there are concerns that it could become more persistent and lead to a recession. Another factor is the potential for rising interest rates, which could lead to a slowdown in economic activity.
🔵 Reasons for Yes
- Stock market crashes
- Fiscal and monetary policy
- Asset bubbles bursting and psychological factors
🔴 Reasons for No
- 3.4 million jobs were created and the unemployment rate — taken out to three decimals — fell to 3.458%, a 50-year low
- The American labour market has shown an uptake
Expert Opinions on Probo Pulse
