WISCONSIN (CoinChapter.com) — Economists expect US economic growth to bottom at 0.8% later this year. A full-blown recession is debatable, but a slowdown is widely viewed as probable.
Economists also expect that although US consumers may avoid a recession in 2023, household budgets and pocketbooks will face a grind until 2024.
Some Wall Street experts have gone as far as to say the Federal Reserve will even cut interest rates sometime next year to relieve the heavy blow Americans are presently experiencing.
As a result, the Gross Domestic Product is expected to grow by 1% or less in 2023.
A recession is defined as two consecutive quarters with economic contractions. To explain further, economic contractions occur when output declines. When an economy produces fewer goods and services, fewer resources and labor are used.
Housing and Banking
Among other factors already mentioned, avoiding a recession is valid as long as the housing market remains near where it is today.
As interest rates go up, home sales go down; that is acceptable because even if home sales drop due to higher lending rates, homes will retain good value as fewer are on the market. In other words, buyers do not have limitless homes to choose from when people decide to sell.
Buyers can be pickier and can either take it or leave it. In addition, shortages of homes resulting from over ten years of limited construction will help protect values.
Banks, too, are in a good spot. They were at risk in the past during the financial crisis when people were getting loans that could never be paid back; today, they are well-funded and can hold up to severe downturns. Moreover, these days there is too much credit floating around and too little, like after the crisis when banks were almost afraid to give a loan to anyone.
The Federal Reserve’s Approach to a Recession
Fed policymakers will not give up or let their guard down; analysts see this as hawkish for the economy. Most importantly, Federal Reserve Chairman Jerome Powell has been viewed as a “dove.”
The Fed’s most well-known dove is Neel Kashkari, president of the Federal Reserve Bank of Minneapolis. For the first time in recent memory, Mr. Kashkari is on board with other hawkish Fed members; he believes the central bank should not take its foot off the gas pedal.
With the Fed keeping its resolve, the US economy should be fine.
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