A quarterly survey released by a major financial publication indicates that while US inflation has been easing, American economists anticipate that higher interest rates could drive a recession in 2023. The Wall Street Gazette.
In the study, 71 economists participated between January 6 and January 10. On average, they assign a 61% probability of a recession, a figure only slightly lower than the 63% recorded in October. The consensus reflects a broad mood of caution about the near-term outlook for the US economy.
The survey also suggests that the Federal Reserve System may struggle to achieve a soft landing this year—an outcome in which inflation cools without precipitating a sharp decline in employment. About three-quarters of respondents share that view, underscoring a widespread belief that policy will remain restrictive for longer to restore stability in both labor markets and prices. The potential consequence, as outlined by contributors, is a higher unemployment rate and a renewed risk of recession.
Economists from Deutsche Bank, notably Brett Ryan and Matthew Luzzetti, argue that the Fed still has significant ground to cover. Their perspective is that the central bank will maintain a stringent policy stance as it seeks to stabilize employment and price levels. In their assessment, this approach could translate into a meaningful uptick in joblessness and a renewed recession risk, even as inflation trends improve.
Looking at the growth trajectory, the surveyed experts project US GDP growth of 0.1% on an annual basis for the first quarter of 2023. In the second quarter, growth is expected to contract by 0.4%, with no expansion anticipated in the third quarter. A modest improvement is forecast for the fourth quarter, with growth edging up to 0.6%. The World Bank has a more optimistic view, projecting a 0.5% increase in the US GDP for the year.
In a broader macroeconomic context, Kristalina Georgieva, longtime Managing Director of the International Monetary Fund, has offered a contrasting outlook, expressing that the United States may still avert a recession in 2023. Her assessment adds another layer to the debate, highlighting how divergent analyses can coexist even as data evolves and policy responses unfold.