The odds of a “hard landing” for the US economy continue to rise

To try to contain inflation, which in May reached 8.6% year-on-year, the United States Federal Reserve (Fed) began to carry out a fierce monetary adjustment, made up of a rate hike and a reduction in its balance sheet. As a result, The chances of the economy entering a recession are getting higher.

Specifically, economists at Swiss bank UBS, led by Jonathan Pingle, said in a note to clients that “the risk of a hard landing is increasing.” “Recession risks are rising. Growth is slowing sharply. Support for pandemic politics is rapidly being phased out. Prices are eroding real income. The economy seems increasingly vulnerable to any new negative shock.

And while UBS still believes a “soft landing” is the most likely outcome for the economy of the United States, there is still a 40% chance that there will be a total recession in the next 12 months, down from just 2.5% forecast a month ago.

UBS’s analysis approximates that of Morgan Stanley. Recently, James Gorman, its chief executive, said: “We may go into a recession, obviously, probably 50-50 now.” The executive raised his forecast from the previous 30%. “It is unlikely at this stage that we will enter a deep or prolonged recession,” he added.

However, he said he is confident the Fed will eventually be able to bring inflation down from its multi-decade highs reached in May. “I don’t think we’re falling into a big hole in the next few years, I think eventually the Fed will get inflation under control,” he said.

Topics

Leave a Comment