Recession in 2022?

The US economy is likely to slow in 2022 and 2023 but will “narrowly avoid a recession” as the Federal Reserve implements its rate-tightening plan to curb inflation, the International Monetary Fund said. 

“The policy priority now must be to expeditiously slow wage and price growth without precipitating a recession” the IMF said in a statement Friday. “This will be a tricky task,” as global supply constraints and domestic labor shortages are likely to persist, and the war in Ukraine creates additional uncertainties, it said.

The Fed’s plan of quickly getting its benchmark rate to 3.5% to 4% “should create an upfront tightening of financial conditions which will quickly bring inflation back to target,” Managing Director Kristalina Georgieva told reporters following the release of the concluding statement on its article IV consultation, the IMF’s assessment of countries’ economic and financial developments following meetings with lawmakers and public officials.

Based on the policy path outlined at the June Federal Open Market Committee meeting, and an expected reduction in the fiscal deficit, the IMF expects the US economy will slow, Georgieva said. The fund has “also just concluded a very useful set of discussions” with Treasury Secretary Janet Yellen and Fed Chair Jerome Powell, she said.

“We are conscious that there is a narrowing path to avoiding a recession in the US,” Georgieva said. “We also have to recognize the uncertainty of the current situation.”

Thanks,

Neetha Ram

Owner, Socialtalky