<mediadc-video-embed data-state="{"cms.site.owner":{"_ref":"00000161-3486-d333-a9e9-76c6fbf30000","_type":"00000161-3461-dd66-ab67-fd6b93390000"},"cms.content.publishDate":1655734592730,"cms.content.publishUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"cms.content.updateDate":1655734592730,"cms.content.updateUser":{"_ref":"00000168-ed7d-d9d9-a9ec-ff7daffb0002","_type":"00000161-3461-dd66-ab67-fd6b933a0007"},"rawHtml":"
var _bp = _bp||[]; _bp.push({ "div": "Brid_55734452", "obj": {"id":"27789","width":"16","height":"9","video":"1034267"} }); ","_id":"00000181-8178-dd13-a9fb-997edaf30000","_type":"2f5a8339-a89a-3738-9cd2-3ddf0c8da574"}”>Video EmbedThe U.S. economy is set to experience a mild recession by the end of the year, according to Nomura economists.
The prediction comes as other economists and firms warn that an economic slowdown is coming given the Federal Reserve’s aggressive hiking of its target interest rate and the war in Ukraine, which is wreaking havoc on global energy markets.
“With rapidly slowing growth momentum and a Fed committed to restoring price stability, we believe a mild recession starting in the fourth quarter of 2022 is now more likely than not,” Nomura economists said Monday.
The major Japanese financial holding company’s growth forecast was also revised downward. The economists now expect U.S. gross domestic product to expand by 1.8% this year, compared to their previous prediction of 2.5%, as a second-half downturn undoes some of the strong growth earlier in the year. Additionally, Nomura projects just 1% growth next year, down from 1.3%.
MOST CEOS SEE A RECESSION COMING: SURVEY
Many economists thought inflation had peaked when it fell to an 8.3% annual rate in April. But then, May’s consumer price index report showed inflation rising again to 8.6%, the highest since 1981, leading investors to think the Fed might take extraordinary steps to lower price pressures.
Last week, the Fed announced that it would hike its interest rate target by three-quarters of a percentage point to a range of 1.5% to 1.75%. The central bank typically raises rates by just a quarter of a percentage point, so the move signals that the Fed is now desperate to drive down prices.
“Indicators of inflation expectations have risen, and projections for inflation have been revised up notably. In response to these developments, the committee decided that a larger increase in the target range was warranted at today’s meeting,” Fed Chairman Jerome Powell told reporters Wednesday.
Raising interest rates is designed to slow demand and thus drive down prices, but too much pressure in that direction could knock the economy into a recession, a possibility that appears more likely by the day.
The Conference Board released a survey on Friday finding that most CEOs are now penciling in a recession or say that their area is already in a recession.
The survey found that 60% of business leaders said they expect a recession, and a weighty 15% said they are already in a recession. Late last year, just 22% of CEOs thought a recession was on the horizon, showing just how much has changed over the past few months.
The World Bank also recently said that many countries across the world will struggle to prevent a recession this year and pared down its global growth forecast.
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Still, the country’s strong labor market does offer some support for the Fed as it jacks up interest rates.
The economy beat expectations and added 390,000 jobs last month. The country’s unemployment rate also remained at 3.6%, an ultralow level that is nearly where it was right before the pandemic struck more than two years ago.
