Monday, June 13, 2022 11:10 am40 Comments

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A U.S. recession is all but unavoidable for next year, according to nearly 70% of leading economists in a new survey. A recession is a period of economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in at least two successive quarters.

Barbara Kollmeyer for MarketWatch:

Nearly 70% of 49 respondents expect the National Bureau of Economic Research to declare a recession next year, according to the FT survey conducted with the Initiative on Global Markets at the University of Chicago Booth’s School of Business that published Sunday.

A third of those surveyed — results were gathered between June 6 and June 9 — see the NBER’s recession call holding off until the second half of next year, while about 40% see it during the first or second quarters of 2023. The survey was conducted before Friday’s U.S. consumer price inflation data which showed May headline number unexpectedly surging to a new cycle high of 8.6% year-over-year.

Colby Smith and Caitlin Gilbert for Financial Times:

Jay Powell, the Fed chair, has conceded that the central bank’s efforts to moderate inflation may cause “some pain”, leading to a “softish” landing that sees the unemployment rate rise “a few ticks”.

But many of the economists polled are concerned about a more adverse outcome given the severity of the inflation situation and the fact that monetary policy will need to shift towards much tighter settings in short order to address it.

“This is not landing a plane on a regular landing strip. This is landing a plane on a tightrope, and the winds are blowing,” said Tara Sinclair, an economist at George Washington University. “The idea that we are going to bring incomes down just enough and spending down just enough to bring prices back to the Fed’s 2 per cent target is unrealistic.”

Nearly 40 per cent of the economists warned that the Fed would fail to control inflation if it only raised the federal funds rate to 2.8 per cent by the end of the year. This would demand half-point rate rises at each of the central bank’s next three meetings in June, July and September before downsizing to its more typical quarter-point cadence for the final two gatherings of 2022.

Few respondents expect the Fed to resort to 0.75 percentage point increases.

Further rate rises are also likely well into next year, said Christiane Baumeister, a professor at the University of Notre Dame, who thinks the Fed could lift its benchmark policy rate as high as 4 per cent in 2023.

MacDailyNews Take: Sub-$130 for Apple would be a very nice deal for those who can accumulate shares for the longer term.

Stop the misguided crusade against domestic energy production and profligate federal spending and inflation will be stopped dead in its tracks. It’s not difficult. – MacDailyNews, May 11, 2022

Earlier this year, Interactive Brokers founder Thomas Peterffy said, “Inflation is 7% — 1% or 2% [in interest rate hikes] doesn’t mean anything. If they really wanted to stop inflation, they would have to raise rates to 4%, 5%, 6%.”

‘Tis best to get a handle on inflation, if you know how, while you still can. – MacDailyNews, May 11, 2021

Inflation is repudiation. — Calvin Coolidge

When a business or an individual spends more than it makes, it goes bankrupt. When government does it, it sends you the bill. And when government does it for 40 years, the bill comes in two ways: higher taxes and inflation. Make no mistake about it, inflation is a tax and not by accident. — Ronald Reagan

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