After months of speculation, economists have finally confirmed a 2023 recession is 100% likely, but experts predict that it will be mild.
In an interview with Yahoo, former Federal Reserve vice chairman Alan Blinder acknowledges how painful rising costs feel to consumers, but the pending recession isn’t as bad as people probably think.
“There are a number of reasons to think it [the recession] will be fairly mild,” Blinder said on Yahoo Finance Live. “One is the huge amount of liquidity that consumers have accumulated, largely because of the transfer payments that were made to lessen the impact of the terrible pandemic recession – so consumers are sitting on a cash pile. And second, this is a fairly dovish FOMC — and what that means to me is they are less likely to overdo it [on rate hikes].”
An economics report recently released by Bloomberg predicts a wide-reaching economic slump, stating that unemployment in the U.S. could reach as high as 6% next year, up significantly from 3.5% in September.
However, Fed Chairman Jerome Powell shared that the central bank is trying to develop a “soft landing,” where the economy slumps just enough to decrease hiring rates and wage jumps to deflate inflation by at least 2% a year.
Data from the US Labor Department revealed inflation hit a 40-year high in September at 6.6% with about a 1.5% increase before next year.
“Fiscal and monetary policy tightening has so far managed to slow demand growth sharply without accidentally overdoing it and sparking a recession, an impressive achievement,” Goldman Sachs economists wrote in a note to clients on Sunday as reported by CNN. “Too great a focus on lagging indicators, too little patience, or tightening too quickly to gauge the impact on the economy in real time could result in a recession that is not entirely intended.”