Caspian Energy Journal Caspian European Club
Tuesday, 20 November 2018 15:00

U.S. recession chances edge up

U.S. recession chances edge up

The Federal Reserve is still expected to raise interest rates again next month and three times next year, but a strong majority of economists polled by Reuters over the past week say the risk is it will slow that pace down, Caspian Energy News ( reports with reference to Reuters poll.

The probability of a U.S. recession in the next two years, while still low, also nudged up to a median 35 percent from 30 percent in the latest monthly Reuters survey of economists taken Nov 13-19. It held at 15 percent for the next 12 months.

While many developed economies are already slowing, growth in the world’s largest economy is still solid, riding the tail-end of a $1.5 trillion tax cut boost, and official unemployment is the lowest in nearly half a century.

But that shine is forecast to start coming off this quarter, with growth slowing more by the end of next year as a trade stand-off with China shows no signs of letting up.

Gross domestic product (GDP) will expand at an annualized rate of 2.7 percent this quarter, down from 4.2 percent in the second quarter and 3.5 percent in the third.

GDP growth is then forecast to slow to 2.0-2.5 percent throughout 2019 and then down to 1.8 percent by mid-2020, about half the latest reported rate.

The trade war U.S. President Donald Trump launched with No. 2 world economy China has already started to hit export-sensitive economies like Germany and Japan. And an Asia-Pacific Economic Cooperation summit ended on Sunday with leaders failing to agree on a final statement for first time in the forum’s history.

That has lowered expectations Trump and Chinese President Xi Jinping will make a breakthrough when they meet at a G20 summit later this month.

The recent sell-off on Wall Street had some expecting the Fed to soften its tone on policy tightening at its November meeting, but the central bank did no such thing.

Economists in the latest poll unanimously said the Fed will raise the federal funds rate by 25 basis points to 2.25-2.50 percent in December.

Median forecasts show three more increases next year, taking the federal funds rate to 3.00-3.25 percent by end-2019. But the third rate rise is a close call, with just over half, 54 of 102 economists forecasting that outcome.

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Person in charge of the newsline: Olga Nagiyeva 


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