Talks of a recession have been swirling for months as the Federal Reserve continues to battle stubborn inflation. Economists started off somewhat conservative with their predictions of if and when the economy could slip into a crisis. But those same experts have rapidly increased their recession forecasts in recent days.
"Our worst fears around the Fed have been confirmed: They fell way behind the curve and are now playing a dangerous game of catch up," Bank of America (BofA) said in a note after the Fed hiked interest rates by 0.75% last week.
BofA analysts predict U.S. economic growth to slow near zero by the second half of 2023, putting the probability of a recession at 40% next year. And Goldman Sachs doubled its prediction of a recession this year, from 15% to 30%. It puts the risk of a recession at nearly 50% in the next two years.
"The Fed has front-loaded rate hikes more aggressively; terminal rate expectations have risen; and financial conditions have tightened further and now imply a substantially larger drag on growth—somewhat more than we think is necessary," wrote Jan Hatzius, chief economist for Goldman Sachs, in a note.
Be sure to check out NACM's eNews this Thursday for an update on inflation and recession forecasts.