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Everything points to the fact that in 2023, the United States will be forced to reduce its economic activities to avoid the weight of inflation, which, although spiraling downward, is still maintained by high margins. for economists a recession this year will be inevitable.
It has been seen before in history, when the Federal Reserve’s only alternative is to stifle inflation with high interest rates, the economy collapses and a decline is left as a result.
The economist Juan Carlos Martínez Lázaro, professor at IE University, It is expected that this year the inflation levels will be lower than those seen in 2022. “But of course it will take time and it will not be in 2023 when it is possible to return to pre-pandemic inflation levels. To reach that stage, months are still needed, ”she indicated.
The unemployment rate will rise
Despite the interventions that the Federal Reserve can probably make to contain the consequences of high interest rates, These will spread throughout the economy, affecting supply chains, services, companies and the purchasing power of citizens.
What the experts predict is that with the rigidity of monetary policies, business activities will be reduced, unemployment will skyrocket and prices will be concentrated on basic items; families will have less consumption.
Economist Steven Bell, head of EMEA at Columbia Threadneedle, points out that his forecast for 2023 is that there will be a recession in the United States: “You have to have one. Its current job market is tighter than ever in a post-war period and, surprisingly, it has not weakened.”
For many experts, the key to stopping the inflationary impact is to give the labor market a breather. But as a domino effect, By having these types of actions in developed economies, emerging markets will also be forced.
The United States will not be the only one affected
Not only the United States will take these measures, Bell indicates that Europe will also walk the same path, due to the increase in energy prices: “I think they need a recession. I don’t think it’s deep. It will be light and the response will be quick, but I think they need it.”
from optimism precisely that is expected, that the recession will be superficial. For KPMG chief economist Diane Swonk, with this decline in economic activity, markets can recover quickly. “We have good balance sheets, and there could be a positive response to a lower rate announcement if the Fed starts to ease.”
Although it is not clear how long interest rates will remain at high peaks, experts affirm that expect the Fed to start rate cuts later this year. “The Fed will have to back off from higher interest rates at some point because of the recession,” Swonk argues.
However, Tom Simons, money market economist at Jefferies, sees that potential recession extending to the end of 2024 if rates don’t come down.
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