According to Fed staff, US could fall into recession with 50% probability

Due to risks of consumer spending slowing, threats to worldwide economic stability and new rate hikes, Fed staff economists see a higher probability of a downturn to come in 2023. This month, the specialists warned US policymakers that there’s nearly a 50% chance of a recession.

Their forecast was presented on November 1-2 during the Federal Open Market Committee meeting, and it became the first warning of this kind made since the beginning of rate hiking in March.

The forecast itself and the main factors of a possible downturn were described in detail in the meeting’s minutes. Slow growth of real private domestic spending, a pessimistic general outlook and tighter financial environment were among the mentioned factors. A possibility of more severe monetary tightening aimed at inflation curbing was also noted as another important downside risk.

The forecast made by the Fed staff might be compared to a survey of economists conducted by Bloomberg. According to their median estimate, there’s a 65% chance of recession in 2023.