As the Fed raises interest rates to fight inflation, a recession could be looming. | Hanson Lu/ Unsplash
As the Fed raises interest rates to fight inflation, a recession could be looming. | Hanson Lu/ Unsplash
According to an April 12 World Economic Forum report, both retail and professional investors hold a gloomy outlook on the country's economic future.
A Bloomberg Markets Live survey, conducted between March 29 and April 1, revealed 48% of investors expect the U.S. to sink into recession next year. Another 21% expect to see the downturn in 2024, while 15% of the 525 respondents anticipate the recession could begin as early as this year.
"PPI (Producer Price Index) is in at 11.4% for March; this forecasts an even higher number of future inflation and certainly the beginning of a recession," Cook County Commissioner Sean Morrison tweeted. "The reckless Biden executive orders and policies issued since day one are the main contributors to most of this. #selfinflicted."
Deutsche Bank was the first major Wall Street firm to predict that the U.S. is on the brink of a recession.
"We no longer see the Fed achieving a soft landing. Instead, we anticipate that a more aggressive tightening of monetary policy will push the economy into a recession," Deutsche Bank economists led by Matthew Luzzetti wrote in a recent note to clients, Fox Business reported. The economists forecast a mild recession that will begin in the final quarter of next year and continue into the first quarter of 2024, with unemployment peaking above 5%, the story said.
Bank of America also announced its prediction of an oncoming recession, Fox reported. In an analyst note to clients, Michael Hartnett, Bank of America chief investment strategist, said that surging consumer prices, combined with an increasingly hawkish central bank, could result in an economic downturn in the U.S. "'Inflation shock worsening, rates shock just beginning, recession shock coming," Harnett said as a warning.
History suggests that the current oil shock increases the likelihood that the U.S. will fall into a recession in the near future. As opinion contributor Liz Peek from The Hill reported, "The last four recessions have been preceded by sharp hikes in energy prices," adding that "$120 oil is a red flag." Peek reported what many economists already know: The Federal Reserve's sole option in its effort to curb spiraling prices is to increase interest rates in order to slow growth.
In the latest Wall Street Journal poll, which was conducted March 2-7 and surveyed 1,500 general election voters nationally, 63% disapproved of Biden’s handling of inflation. Additionally, by a wide margin, respondents selected Republicans over Democrats as better equipped to deal with inflation.
On April 12, the Bureau of Labor Statistics (BLS) released the Consumer Price Index (CPI) data for the 12 months ending March 2022. The data showed an 8.5% all items annual increase, which is the steepest increase in over 40 years, since 1981.
Michigan's mortgage rates currently are 5.17% for a 30-year fixed mortgage, 4.34% for a 15-year fixed mortgage and 3.25% for a 5/1 adjustable-rate mortgage (ARM), Bankrate.com reported on April 13.
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