NEW YORK (Business Insider) - Almost 70% of economists expect the U.S. to tumble into a recession in 2023, according to a Financial Times survey, as the Federal Reserve attempts to bring down soaring inflation.
Just under 40% of the 49 leading economists polled by the FT and the University of Chicago’s Booth School of Business said the declaration of a recession would come in the first or second quarter of 2023, with a third saying it would come later in the year.
The FT’s poll comes just after data on Friday showed U.S. inflation jumped to a 41-year high of 8.6% in May, defying expectations that it would stay at 8.3%.
Inflation rose 1% between April and May alone, the figures showed, as energy prices remained elevated in the wake of Russia-Ukraine war.
The surge in inflation has caused analysts to expect faster and bigger interest-rate hikes from the Fed, with some traders even expecting a 75 basis point hike later this week.
Goldman Sachs economists, led by Jan Hatzius, said in a note Sunday they expect the Fed to hike by 50 basis points at the June, July, September, and November meetings. They expect interest rates to peak at 3.25-3.5% after two further 25 basis point hikes in December and January.
Many economists think those kinds of interest-rate rises will choke off economic activity to the point that the U.S. tumbles into a recession. They say the Fed will not be able to engineer a “soft landing” for the economy.
Recessions in the U.S. are adjudicated by the National Bureau of Economic Research, which defined them as a period when activity declines significantly across the economy and which lasts more than a few months.
The economists polled by the FT thought a recession is unlikely to come in 2022, however, with the bulk predicting that jobs growth would stay strong. Only one economist expected a recession in 2022.