Bank Economists Advise Caution But Don't Expect a Recession

Source: American Banker

The U.S. economy will slow this year and through 2024 but avoid recession, despite a cavalcade of threats that include soaring inflation, war in Europe and nagging supply chain disruptions, a team of prominent bank economists said.

The American Bankers Association’s Economic Advisory Committee, composed of 13 chief economists from some of North America’s largest banks, expects the Federal Reserve’s current rate hike agenda to help gradually curb inflation from above 8% now to near the Fed’s objective of 2% over this year and next.  

The Fed twice raised rates in the spring and signaled that several more increases are on the horizon this year. This comes after the country's rapid recovery from a pandemic-induced slump ignited a surge in inflation. The U.S. Labor Department said its consumer price index in April hit 8.5%, nearly a four-decade high. Inflation has exceeded 6% for seven consecutive months. 

A methodical pace of rate increases could address inflation without shocking the consumer-driven U.S. economy, the ABA economists said in a report and during a press conference Friday. Consumer spending will slow in the face of higher rates on big-ticket items such as homes, impacting the economy’s growth trajectory but not stunting it, the economists said.