La Reserva Federal prevé una recesión en Estados Unidos a partir del cuarto trimestre
According to the minutes of the latest Federal Reserve meeting released on Wednesday, economists at the Federal Reserve have set a date for the long-awaited recession in the United States. They now predict that it will occur in the last quarter of this year and the first quarter of the next.
The economic forecasts prepared by experts for the May meeting of the Federal Open Market Committee (FOMC), which decides monetary policy, assume that the effects of the planned tightening of bank credit conditions, amid already restrictive financial conditions, will result in a mild recession starting from late this year, followed by a moderate recovery. The minutes state that a slowdown in real GDP is expected in the following two quarters, before registering a modest decline both in the fourth quarter of this year and the first quarter of the next.
During the March meeting, Federal Reserve economists had already indicated in the minutes that they anticipated a mild recession in the United States by the end of the year. Federal Reserve Chairman, Jerome Powell, clarified that a mild recession would mean “an increase in unemployment that is lower than what has been usual in modern-era recessions.”
However, Powell made it clear that the economists’ forecast does not necessarily reflect the views of the members of the monetary policy committee. The Federal Reserve Chairman himself still believes in the possibility of a soft landing, meaning controlling inflation without falling into a recession.
The minutes provide little insight into the next move on interest rates. The Federal Reserve fulfilled analysts’ and investors’ expectations by raising rates to 5%-5.25% in the last meeting but did not indicate any further increases. In the post-meeting statement, the committee mentioned that it will closely monitor the information received and evaluate its implications for monetary policy.
While everything seemed to point to a pause, Jerome Powell clarified in the subsequent press conference that it was too early to consider the rate hikes finished and that decisions would be made “meeting by meeting.” He stated, “The decision on the pause has not been made today,” and insisted that the issue would be addressed in the June meeting.
The minutes convey the same message, reflecting some division and stating that “the desirability of increasing the target range [of rates] after this meeting was now seen as less clear.” Some participants, known as hawks, commented that, based on their expectations that progress in returning inflation to 2% could remain unacceptably slow, a firmer monetary policy stance would likely be justified in future meetings. On the other hand, some participants, known as doves, pointed out that if the economy evolved according to their current outlook, further firming of monetary policy might not be necessary after this meeting. In conclusion, the course of action remains uncertain.
The Upcoming Meeting
On the same Wednesday, one of the members of the monetary policy committee, Governor Christopher Waller, stated that it is too early to know what will happen at the next Federal Reserve meeting on interest rates, which will take place on June 13 and 14. In his remarks, he expressed support for maintaining flexibility until then. However, even if there is a pause, it does not mean that interest rates have reached their peak, he explained.
“I am not in favor of stopping rate hikes unless we have clear evidence that inflation is approaching our 2% target,” Waller said at an event at the University of California in Santa Barbara. “But whether we should raise rates or not at the June meeting will depend on how the data comes in over the next three weeks,” he added. By the time a decision is made, the inflation data for May and many other indicators will be available. The minutes of the latest meeting released on Wednesday do not clarify the doubts.
“We still have some important data releases in the next three weeks and I will also have a better understanding of the evolution of credit conditions, both of which will inform me about the best course of action,” Waller explained. “Until then, we must maintain flexibility regarding the best decision to make in June.”
In a recent speech, Powell reiterated that the banking turmoil could result in lower interest rate hikes. He stated, “While financial stability tools have helped calm conditions in the banking sector, the evolution in that sector, on the other hand, is contributing to tighter credit conditions and is likely to weigh on economic growth, hiring, and inflation. Consequently, our official interest rate may not have to rise as much to achieve our objectives. Of course, the extent of this is highly uncertain,” he said at a conference where he was joined by his predecessor, Ben Bernanke.
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