The US economy will enter a mild recession probably by the end of 2022, as the Federal Reserve raises interest rates to tame inflation, according to analysts at the Japanese company Nomura.
In particular, according to Bloomberg, Nomura warns that financial conditions will be further reduced, at a time when the consumer climate is deteriorating, energy and food supply problems are intensifying and the outlook for global growth is slipping.
“With growth momentum slowing and the Fed determined to restore price stability, we believe a mild downturn in the fourth quarter of 2022 is now more likely than not,” said economists Aichi Amemiya and Robert. Nomura Dent in their note today.
Excessive savings and consumer purchasing power will help mitigate the economic contraction, analysts at the Japanese firm said, noting that monetary and fiscal policy will be restrained by high inflation.
Nomura also cut its forecast for real US GDP this year to 1.8% from the 2.5% it had previously expected, while for next year it sees a decline of 1% when its previous estimate was for growth 1, 3%.
The house analysis comes in the wake of statements by Treasury Secretary Janet Yellen, who said Sunday that “unacceptably high” prices are to be maintained for consumers throughout 2022 and that he expects the US economy to slow.
In her own statement, Cleveland Fed Chairman Loretta Mester also said yesterday that the risk of a downturn in the US economy was growing and that it would take years for inflation to return to the bank’s 2% target.
For their part, Nomura analysts estimate that “with monthly inflation likely to remain high for the whole of 2022, the Fed’s response to decline will not be felt initially.”
Unemployment is projected to rise to 5.2% by the end of 2023 and 5.9% in 2024, up from 4.3% in the same period.
Finally, they estimate that the Fed interest rate increases will continue in 2023, but with a slightly lower final interest rate in the region of 3.50 – 3.75% to be formed in February, compared to the previous forecast of 3.75-4 % on March.
Source: Capital
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