Aggressive Fed policies risk triggering a deeper recession

The biggest threat to the U.S. economy next year is the Federal Reserve's overly aggressive policy, which risks triggering a severe economic recession by pursuing the tightest monetary policy in decades, according to a recent survey released Monday.

According to a survey conducted by the National Association for Business Economics, most members of the group believe the economic risks are heading downward.

About one in eight respondents believe the possibility of a recession this year is above 50%, but more than 40% of respondents believe the possibility of a recession in 2023 will be above 50%.

David Altig, president of NABE, said respondents to the NABE Outlook Survey expect slower growth and higher inflation in both 2022 and 2023 than they had previously predicted. He added that survey participants raised their expectations of how high interest rates would rise.

Although survey participants expect inflation to remain high this year and next, their views on whether unemployment will rise as a result of higher interest rates, and if so, how many Americans might lose their jobs, continue to diverge.

About 33 percent of respondents think it will take a significant increase in unemployment for the Fed to be able to lower inflation, but about the same percentage of respondents think the U.S. central bank can stabilize an extremely tight labor market without a significant increase in unemployment.

There is a growing expectation on Wall Street that the Fed will trigger an economic slowdown. Economic growth has already declined in the first two quarters of the year, with gross domestic product, the most common measure of the volume of goods and services produced in the country, down 1.6 percent in the winter and 0.6 percent in the spring.