Declining inflation has helped ease fears of an impending recession, especially as the job market continues to show historic strength, but the housing market collapse has worsened and the Federal Reserve’s With so much uncertainty in the course of rate hikes, many experts, including policy makers, have warned: It is still too early to know how hard this recession will ultimately be.
Minneapolis Fed President Neil Kashkari, one of 12 central bankers to vote for a change in Fed policy, said in a public statement Thursday that the labor market remains very strong and wages Rising and consumer demand remains resilient.
While acknowledging the strength of the economy, where inflation is starting to show signs of slowing, Kashkari said he was cautious about whether inflation could continue to come down without triggering a recession. And I replied, “I don’t know.”
The Federal Reserve still needs to contain high inflation “immediately”, and promised to keep raising rates to cool demand, saying “because the Fed continues to raise rates.” , the economy will continue to slow, increasing the likelihood of a recession.”
The cautious statement was made after home builders and realtors declared a recession in the housing market this week.
The Atlanta Fed on Tuesday lowered its third-quarter economic growth forecast to 1.8% from 2.5%. Data showed an unexpected plunge in housing starts last month to the lowest level in more than a year. rate.
Goldman Sachs economists also fear a recession will be hard to avoid as the Fed struggles to combat inflation, with officials saying it’s off to a “good start, but [have] It’s a long road.”; Moody’s Analytics on Monday put the odds of a recession next year at 50%.
Rising interest rates are having a brutal impact on the housing market, pushing up the cost of buying a home by hundreds of dollars each month, resulting in a sharp drop in demand. Existing home sales have plunged nearly 30% from their January highs. Meanwhile, home prices are still skyrocketing, making affordability even worse. “While we’re seeing a housing recession in terms of declining home sales and home construction, it’s not a housing price recession,” said Lawrence Yuen, an economist at the National Association of Realtors, on Thursday, adding that existing home prices were down in the middle. He pointed out that the value fell to $403,800. June hit a record high, but he’s still up nearly 11% from a year ago.
Consumer prices rose 8.5% in the 12 months to July, slowing for the first time in months, raising hopes that the Fed’s efforts to contain inflation will finally work. Inflation hit 9.1% in June, his highest in 40 years, after gasoline prices soared to unprecedented levels.
Federal Reserve Board
The Fed raised interest rates another 75 basis points at its latest policy meeting in July. That’s as the official debated “unacceptably high inflation” and admitted that economic growth was “significantly weaker” than he thought a month ago. Goldman expects most of the rate hikes in this tightening cycle to be in the past, with a rate hike of 50 basis points in September and only 25 basis points in November and he forecasts in December. , it is up to the rate of inflation to fall.
After a blockbuster jobs report that showed the economy added more than 500,000 jobs in July, unemployment claims fell again this week and there was a wave of layoffs among several giants. Nonetheless, the labor market showed continued strength. Meanwhile, average hourly wages jumped more than expected, rising 5% to $32.27 in July, a record high. Pantheon Macro chief his economist Ian Shepardson said, citing better-than-expected data, “the labor market has eased only slightly.” “There is no recession here.”
Stocks are struggling to find direction after gaining more than 15% since the Fed’s rate hike in June, when many investors concluded the worst rate hike may be over. However, the S&P 500 is still down 12% this year compared to his 21% rise in 2021. Bank of America has warned that slower-than-expected economic growth could push stocks lower further, and if inflation is not contained, the Fed’s more aggressive policy will certainly shake the market again.
The Fed still has a ‘long way’ to keep inflation under control without triggering a recession (Forbes)
Stock market crash isn’t over, according to indicators with ‘perfect’ track record (Forbes)
Home market recession is here: Homebuilders cut prices as buyers cancel contracts (Forbes)