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Recession Fears Remain Despite Cooled Inflation

The Federal Reserve's aggressive interest rate hikes seem to have helped cool inflation, but many businesses still feel the strain of high prices—and some economists believe a recession is the only way to bring inflation down to the 2% goal.

The Consumer Price Index (CPI) measured at 6.4% year-over-year in January, a slowdown from the 7.1% in November and 40-year high in July. Some economists remain optimistic, as the Fed announced the "disinflationary process has begun." But others impacted, such as small businesses, do not think the same.

Nearly half of small business owners (47%) say the economy is in a recession already, with an almost equal percentage (48%) describing the economy as "poor," according to CNBC. "The Fed's job is to look ahead and project what they expect to take place—and to help everyone prepare for it," said Laura Wronski, senior manager of research science at Momentive, told the news outlet. "Small business owners are still reporting to us that inflation is a concern, that hiring is a challenge and that the economy overall is unstable. These will be key measures to continue to examine in future quarters, because we're getting clear signals from Powell that the worst is over, and yet small businesses still report being mired in a very recessionary environment."

In attempts to cover higher expenses, many consumers have turned to credit—at a 15% year-over-year increase, according to a Federal Reserve Bank of New York report. "Consumers are increasingly struggling to navigate the ongoing effects from the spike in prices last year by drawing on credit and savings," said John Leer, Morning Consult's Chief Economist. "With consumer demand likely to continue its downward trajectory, business investment is also likely to slow in the coming quarters, increasing the probability of a recession this year."

Come back next Tuesday for NACM's continued recession coverage. 

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Wednesday, 21 February 2024

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