Fitch Ratings expects a modest recession to occur in the United States by the middle of this year. The implications of such a recession on various sectors and the overall economy would be significant and warrant careful consideration. While inflation may be lower than estimated, with core inflation gradually decreasing from previous highs. The prospect of a faster reduction in inflation is also on the horizon.
In an interview with CNBC-TV18, Jeremy Zook, Director-Asia-Pacific Sovereigns at Fitch Ratings said that his firm expects a modest recession in the US by the mid of this year.
He said, “We do forecast a modest recession in the US during the middle of this year. So far, the US economy like many economies has been very resilient in the face of rising interest rates, but we do think that just the pace and magnitude of interest rate increases will start to bite at some point and drive a modest recession in the US.”
Another area of interest for Zook is the possibility of lower-than-expected inflation. While many analysts have been predicting a surge in inflation due to stimulus spending and supply chain disruptions, Zook believes there is a growing possibility that inflation will be lower than estimated.
“There is a growing probability that inflation is lower than what we expect. If we look at the recent inflation numbers, the headline is now back within the target band, and core inflation, it seems is coming off its persistent highs. So that is certainly a positive sign going forward. We do have inflation gradually coming down over the year and that could happen a little faster than what we anticipate,” he said.
This view is supported by recent data showing that core inflation is coming down from persistent highs. Zook expects that this trend is likely to continue, and inflation estimates could be revised downwards. This could happen faster than anticipated, which would be good news for consumers and investors alike.
Despite the potential for a recession, Zook's overall outlook for the US economy remains positive. He believes that the country's strong fundamentals will continue to drive growth and that inflation will gradually reduce over time.
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