Now that inflation is subsiding, what are the chances of an economic recession in 2023?

Now that inflation is subsiding, what are the chances of an economic recession in 2023?

The head of the US Federal Reserve has been clear in saying that to regain current control of the aggressive cycle of interest rate hikes, interest rates would probably have to stay high for longer. Will this lead the country into an economic recession?

Inflation in October began to subside after being high for several months, exceeding 8% and reaching almost 9%. According to the United States Bureau of Labor Statistics (BLS), this month it reached 7.7%, which leads some to see hope that the Federal Reserve (FED) will no longer return . to raise interest rates and with it, the chances of an economic recession are removed.

So far, Fed leader Jerome Powell has been pretty clear. He has not hesitated to suggest that, in order to regain control of the current aggressive interest rate hike cycle, rates would likely have to stay high longer and end up higher than initially anticipated.

His reason is that a tight job market is causing wage pressure. According to the latest US employment report, an increase of 260,000 jobs was reported, an unemployment rate of 3.7% and a wage increase of 4.6%. All of this, analysts explain, reinforces the Fed’s fears about an overheated labor market.

According to an economic model carried out by Bloomberg Economics, it was projected in October that there is a 100% probability that the United States will enter an economic recession at some point in 2023.

For their part, Fitch analysts estimated that a “fairly moderate” recession would occur in the second quarter of 2023 because slowing inflation would drain people’s incomes and make them cut back on spending.

One of those who has weighed in on the matter is JPMorgan CEO Jamie Dimon, who said there were serious things that painted a bleak picture for the United States. When he made these statements, he was referring specifically to high inflation in the United States, the Fed’s interest rate hikes to contain it, and the impact of the war between Russia and Ukraine.

For his part, US President Joe Biden said last month that he recognized that the economy could go through a “very slight” recession , statements he offered before the midterm electoral process took place in The congress.

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