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Fed estimates that the United States would enter a slight recession at the end of 2023

Fed estimates that the United States would enter a slight recession at the end of 2023

The Federal Reserve of the United States (Fed) foresees that the US economy could enter a slight recession in the last stretch of the year.

According to the minutes of the last Federal Reserve meeting published this Wednesday, projections point to a slowdown in the US economy over the next two quarters, entering a recession at the end of the year before picking up pace and beginning to recover.

The economic forecasts prepared by the experts for the May meeting of the FOMC [el comité de mercado abierto, que decide la política monetaria] They continued to assume that the effects of the expected further tightening of bank lending conditions, amid already tight financial conditions, would lead to a mild recession from the end of this year, followed by a recovery at moderate pace”, the minutes indicate.

Real GDP was expected to slow in the next two quarters, before posting a modest decline in both the fourth quarter of this year and the first quarter of next”, they add.

At the March meeting, where they had already anticipated a possible recession at the end of the year, Fed Chairman Jerome Powell pointed out that a mild recession should be understood as “where the rise in unemployment is less than has been typical of modern-era recessions”.

In their remarks, the members of the Fed highlighted the robustness of the labor market and the limited effects of the banking crisis, which seems to have persisted after the purchase of the First Republic bank by JPMorgan Chase, and considered that this strength could complicate their work to return inflation to acceptable levels.

Fed members come with “less security” the pace that the increases in the official interest rate should have from now on, opening the door to a pause, although they remarked that inflation continues above its 2% target.

Participants generally expressed uncertainty about the appropriateness of further tightening of monetary policy”, can be read in the minutes of the last meeting of the body, published this Wednesday.

At the meeting, which took place at the beginning of May, the US central bank decided to raise the official interest rate by 0.25 points to place it in a range of between 5% and 5.25%, its highest rate in 15 years.

The phrase is in line with the latest comments by the Fed Chairman, Jerome Powell, who recently acknowledged that the tensions in the banking system emerged at the beginning of March “possibly“have made the rate”don’t need to increase as much as you would have needed” had the crisis not occurred.

Source: Gestion

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