Recession Predictions Are Piling Up. Don't Freak Out.
Projecting the economy two years out is almost impossible in normal times, let alone coming out of a pandemic accompanied by unprecedented stimulus.
The negative effect of the Fed's rate increases could be blunted by consumers' willingness to spend.
Photographer: Calla Kessler/Bloomberg
Wall Street’s focus seems to have changed in recent days from how fast and how high the Federal Reserve will raise interest rates to the timing of the next recession. The two are not mutually exclusive. The consensus is that the Fed is so far behind that curve when it comes to increasing rates that it will have no choice but to tighten monetary policy so severely that it forces the economy to contract to get inflation under control. The problem with such forecasts is that they read like a page out of the pre-pandemic playbook.
The recession chatter has been building for a few weeks but really picked up on Easter Sunday, when Goldman Sachs Group Inc. chief economist Jan Hatzius published a report putting the odds of a recession at about 35% over the next two years. He noted that 11 out of 14 tightening cycles in the U.S. since World War II were followed by a recession within two years.