Sixty three percent of economists believe a recession will occur in the next year, marking the latest increase in such a prediction, according to The Wall Street Journal’s economist survey.
Forty nine percent predicted a recession in The Wall Street Journal’s July survey, and the latest poll marks the first time since July 2020 that a majority said a recession would occur in the next year.
The pollster surveyed the 66 economists days before the Labor Department released new inflation data showing the consumer price index (CPI), a weighted market basket of household goods and services, rose 0.4 percent in September and 8.2 percent over the past 12 months, exceeding expectations.
Stubborn inflation will increase pressure on the Federal Reserve to keep increasing its baseline interest rate range, which would further cool off demand to ease price gains while increasing the risk of tipping the U.S. economy into a recession.
The Wall Street Journal’s survey found the economists on average predicted the midpoint of the federal funds rate range will reach 4.267 percent by the end of the calendar year, a higher estimate than past surveys.
The economists as recently as July predicted the midpoint at the end of 2022 would reach just 3.294 percent.
That prediction is just above the current range between 3.0 and 3.25 percentage points, which was set by the Federal Reserve last month after its third consecutive 0.75 point hike.
The central bank’s committee that oversees rate increases will meet again in the first few days of November before convening a final time in mid-December.
Fed officials have vowed to continue hiking rates to tamper inflation, even if it means driving the economy toward a recession.
After the latest rate hike announcement, Fed Chair Jerome Powell said he expected an uptick in unemployment as a result of the increased borrowing costs, which makes it more expensive for businesses to expand and individuals to take on debt, like a mortgage or credit card debt.
“If we want to light the way to another period of a very strong labor market, we have got to get inflation behind us,” Powell said. “I wish there were a painless way to do that. There isn’t.”
The Labor Department’s latest job report shows the U.S. added 263,000 jobs in September as the unemployment rate fell to 3.5 percent, a steady increase that has slowed from a torrid pace earlier in the year.
The Biden administration, which repeatedly touts the recent jobs reports, has portrayed a more optimistic economic outlook.
President Biden told CNN’s Jake Tapper in an interview that aired last week that Americans should not prepare for a recession while acknowledging a slight downturn is possible.
“It hadn’t happened yet,” Biden said. “I don’t think there will be a recession. If it is, it’ll be a very slight recession. That is, we’ll move down slightly.”