What Experts Think About 2023 Recession?

•  Hadar.Goldberg

•  Dec 31 2022
 

Economists and analysts have been predicting for many months a recession that is approaching by leaps and bounds towards 2023. While there is a consensus among the experts regarding the reason behind the period of contraction that is on the horizon - the sequence of interest rate hikes, the main weapon of the Federal Reserve in its war on inflation, differences of opinion prevail among the experts regarding the nature of the crisis: deep or shallow, long or short, soft or hard landing.

As far as the Fed is concerned, a scenario of the economy slowing down is not a mistake and the purpose of raising interest rates is to cool the economy and thus, ultimately, bring about a decrease in the inflation rate. But reality often behaves differently than the models expected, and the fear of a hard landing and a cooling that will turn into a recession increases as inflation remains sticky.

"Historically, when there is high inflation and the Fed raises interest rates to suppress it, the result is a slowdown or a recession," Mark Zandi, chief economist at Moody's Analytics.

Zandi continues and explains that it may be that the anticipation of a recession, and not the recession itself, is enough to change consumer behavior, cool the economy, and remove from the Fed the compulsion to tighten policy to the point of suffocation.

Zandi is among the few analysts who think the Fed can prevent a recession by raising interest rates for a long enough period of time to prevent slowing growth. His forecasts for the job market are likewise less glum than others.

Blame it on the Fed

The Fed is now slowing the economy after bailing it out during the last two recessions, when it helped stimulate lending by cutting interest rates to zero, and increased market liquidity by adding trillions of dollars in assets to its balance sheet. Now, after saving the economy was successful and resulted in a price increase that weakens the spending power of consumers and corporations, the Fed has now come to its rescue from the opposite scenario and raised it quickly.

"We need to shake the dust off the economics textbooks. This is going to be a classic recession," Tom Simmons, money market economist at Jefferies, told CNBC. "Companies will take steps to reduce expenses. The first place we are going to see this is in reducing the number of employees. We will see it in the middle of next year, and then we will see a significant slowdown in economic growth, and inflation will also decrease."

"I'm hoping for a short, shallow recession, but hope is eternal," said Diane Swank, chief economist at KPMG. "The good news is that we should be able to recover from this quickly."

The Fed, unlike many others, does not refer to a recession in its forecasts and even predicts slight growth for the year, but even this does not convince Swank: "We will have a recession because the Fed is trying to create one. When you say that growth is going to stop and the unemployment rate is going to rise, it's clear that the Fed has a recession in its forecast, even if they won't say it."

Conclusions

There are many different factors that can influence the direction of the economy, and it is difficult to predict with certainty what will happen in the future and It is always a good idea to stay informed about economic developments and to plan for various scenarios.

Please note that the article should not be considered as investment advice or marketing, and it does not take into account the personal data and requirements of any individual. It is not a substitute for the reader's own judgment, and it should not be considered as advice or recommendation for buying or selling any securities or financial products.

Read Next

Leading Gainers

Upgrades

Downgrades

Top Leaders

Ipo's

Dividend

Option Activity

Insiders Activity

Institutional Holdings

New Products

FDA Approvals

Agreements

Financial Reports

Log In

Sign Up

Contact Us

Terms of use

Privacy Policy