The Federal Reserve expects a recession in the United States starting in the fourth quarter | Economy

Economists at the Federal Reserve have set a date for the recession that everyone has been waiting for in the United States for a year, but it never ends. And now its economists expect that to happen in the fourth quarter of this year and the first of next year, according to the minutes of the last meeting of the Federal Reserve published on Wednesday.

Economic forecasts prepared by experts for the May meeting of the Federal Open Market Committee [el comité de mercado abierto, que decide la política monetaria] And they continued to assume that the effects of the expected tightening in bank lending conditions, amid already difficult financial conditions, will lead to a moderate recession from the end of this year, followed by a recovery at a moderate pace. Minutes says, which goes a little further: “A slowdown in real GDP was expected in the next two quarters, before it recorded a modest decline in both the fourth quarter of this year and the first in the following quarter,” they added.

At the March meeting, the Fed’s economists had already gone on the record that they expected a moderate recession in the United States by the end of the year. Its president, Jerome Powell, noted that a mild recession should be understood as “in which the increase in unemployment is less than is typical for recessions in modern times.”

In any case, Powell made it clear that technicians’ expectations should not be shared by MPC members. The head of the Central Bank himself is still confident in the possibility of a soft landing, that is, controlling inflation without falling into recession.

What the minutes didn’t shed much light on was the next move in interest rates. The central bank met the expectations of analysts and investors at the last meeting. The Fed raised interest rates to 5%-5.25%, but no longer takes new increases for granted, as it did until then: “The committee will closely follow the information it receives and assess its implications for monetary policy,” he said in a post-meeting statement. .

Although everything seemed to point to a pause, Jerome Powell made it clear at the following press conference that it was too early to end rate hikes and that decisions would be made “meeting by meeting”. “The decision to stop was not taken today,” he said. “We will address this issue in the June meeting,” he stressed.

This same message is conveyed through the minutes, in which a particular section is valued and reflected that ‘the desirability of increasing the target time period [de los tipos] After this meeting it is now less safe.” The Hawks: “Some participants commented that based on their expectations that progress in returning inflation to 2% may remain unacceptably slow, tighter monetary policy is likely to be warranted at future meetings. Doves: “Many participants noted that if the economy performs in line with its current expectations, then tighter monetary policy may not be necessary after this meeting.” Conclusion: We’ll see.

next meeting

On the same Wednesday, a member of the Monetary Policy Committee, Governor Christopher Waller, indicated that it was too early to tell what would happen at the next meeting of the Federal Reserve on interest rates, which will be held on the 13th and 13th. June 14th. In his intervention, he showed himself in favor of maintaining flexibility until then. In any case, even if there is a pause, it does not mean that prices have reached a maximum, he said.

“I’m not in favor of halting interest rate hikes unless we have clear evidence that inflation is approaching our 2% target,” Waller said at an event at the University of California, Santa Barbara. “But whether or not we should attend the June meeting will depend on how the data turns out in the next three weeks,” he added. By the time the decision is made, inflation data for May and many other indicators will already be known. The minutes of the last meeting, published this Wednesday, do not remove doubts.

“We still have some important data releases ahead of us in the next three weeks, and I will also get a better understanding of how credit conditions are evolving, both of which will inform me on the best course of action,” Waller explained. “Every now and then we have to be flexible about the best decision we make in June.”

In a recent speech, Powell insisted that the banking storm could translate into higher interest rates: “Although financial stabilization tools have helped calm conditions in the banking sector, developments in this sector, on the other hand, are contributing to a tightening of credit conditions.” And it is likely to affect economic growth, employment and inflation. As a result, our key interest rate may not need to rise as much to achieve our goals. Of course the extent of this is not entirely certain,” he said at a conference he was attending with his predecessor Ben Bernanke.

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