As the Federal Reserve raised interest rates since March to their highest level in 22 years in an effort to slow inflation, economists braced for what many experts considered to be an inevitable recession looming in 2023. Now, many experts are predicting that a soft landing is more likely.
“Blame it on economic theory not matching reality, groupthink among forecasters, or political partisanship by opponents of the Biden administration, but a year ago much of the US was convinced the country was in a recession, or would be soon,” Reuters reported.
In April 2022, Reuters polled economists about the risk of a recession one year out from the Fed approving a 0.25 percentage point rate hike — the first increase since December 2018. At that point, a fourth of the respondents thought a recession was likely within the year. A repeat poll in October 2022 had 65% economists anticipating a recession. The most recent poll has that number trending downward at 55%.
Federal Reserve Chair Jerome Powell said last month at a news conference that Fed staff economists have themselves walked back the idea of a looming recession, saying that “given the resilience of the economy recently, they are no longer forecasting a recession.”
According to Forbes Senior Contributor Simon Moore, a fourth-quarter recession is unlikely, as “economic growth is accelerating.”
That’s not to say that a recession might not follow in 2024, according to some experts. A soft landing is more likely, however, said Michael Gapen, chief US economist at Bank of America.
“Recent incoming data has made us reassess our prior view that a mild recession in 2024 is the most likely outcome for the US economy,” Bank of America economists, led by Gapen, wrote in a note to clients, as reported by Bloomberg.
