'I’d put the odds [of a U.S. recession this year] on the lower side; maybe a 35 percent chance. I think that over the next six to nine months, the economy is going to be okay,' macroeconomic analyst jturek18 tells EricLevitz
are betting that this time won’t be different. Bond markets are implicitly predicting a recession by the end of 2023. In recent surveys, most economic analysts have concurred with that assessment.newsletter, Turek believes that the U.S. economy will likely grow throughout 2023. And though he thinks that the U.S. is at risk of suffering a recession next year, he insists that a “soft landing” remains possible.
Put differently, the prices of used cars and rental housing shot up to a point where the prices themselves started to reduce demand, which led to falling prices. And then, at the same time, global oil prices cooled off. Now, consumers are spending a smaller fraction of their income on the essentials of housing, transport, and energy, which has left them with more money to spend on other things. So disinflation in some parts of the economy may end up feeding demand and inflation in other parts.
Yeah. I think that over the long term, this dynamic will push the Fed to stay at these higher yields for longer. And then the question that will arise in the next 19 to 24 months is: How long can the real economy take 4 or 5 percent interest rates? Which is to say, real interest rates of 2 percent? Can the economy absorb that over a two-year time horizon? And I think that’s unknown.
So, I think the optimistic scenario is very much alive. And I think the playbook for achieving that is the one that [Federal Reserve chair] Jay Powell has laid out. The Fed is concerned with the very essence of trend inflation, or what John Williams of the New York Fed calls the innermost part of the inflation onion, which is inflation minus food, energy, and owner’s equivalent rent.
Yeah. And lower wage growth is key for two reasons. First, if people aren’t getting 5 or 6 percent wage increases every year, then that directly moderates demand. Second, it also helps the Federal Reserve to trust that whatever disinflation we’re seeing will be sustainable.
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