MSNBC News: Why everyone believes a recession is coming in 2023?

Everyone is frequently caught off guard by recessions. The likelihood that the next one won’t is quite high.

Since months, economists have been predicting a recession, which the majority believe would begin in the first quarter of 2019. The assumption that the economy is entering a period of contraction is essentially the mainstream opinion among economists, whether it is deep or shallow, long or short.

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According to Mark Zandi, chief economist of Moody’s Analytics, when inflation is high and the Fed raises interest rates to combat it, it typically results in a downturn or recession. The typical overheated scenario that results in a recession “always occurs. This tale has been told before. The economy eventually collapses under the weight of increased interest rates when inflation increases and the Fed raises interest rates in response.

Zandi is one of the few economists who thinks the Federal Reserve can prevent a recession by hiking rates just slightly longer than necessary without stifling growth. But he said that there are many predictions that the economy would tank.

Recessions often come on suddenly. CEOs hardly seldom discuss recessions, according to Zandi. It seems that CEOs are rushing to declare that a recession is about to begin. Everyone on TV mentions the recession. Recession, says every economist. It’s unlike anything I’ve ever seen.

Fed is to blame this time.

Ironically, the Fed is weakening the economy after saving it during the last two recessions. By lowering interest rates to zero, the central bank encouraged lending and increased market liquidity by adding trillions of dollars’ worth of assets to its balance sheet. It has quickly increased interest rates from zero in March to a range of 4.25% to 4.5% this month as it unwinds its balance sheet.

Nevertheless, during those two most recent recessions, policymakers did not have to worry about high inflation eroding consumer and business purchasing power or spreading across the economy through the supply chain and wage increases.

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Inflation is now a severe issue for the Fed. It anticipates more rate increases up to approximately 5.1% by the beginning of next year, and experts anticipate it may keep such high rates in place to contain inflation.

Home sales in November were down 35.4% from last year, the tenth consecutive month of fall, indicating that those higher rates are already having an impact on the housing market. Nearly 7% is the 30-year mortgage rate. Additionally, in November, consumer inflation continued to soar at an impressive 7.1% annual pace.

Your economics textbook needs to be dusted up. According to Jefferies money market analyst Tom Simons, this recession will be a typical one. We’ll start to see some noticeable margin compression in corporate earnings from the beginning of next year, according to the transmission mechanism. They’re going to start making efforts to reduce their spending once it begins to take root. The first sign of it will be a personnel reduction. By the middle of next year, we’ll see that, at which point both inflation and economic growth will be much slower.

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