Odds are now close to even that the U.S. economy will slip into a recession within the next year as persistent and rapid inflation emboldens the Federal Reserve to pursue larger interest-rate hikes.
The probability of a downturn over the next 12 months stands at 47.5%, up sharply from 30% odds in June, according to the latest Bloomberg monthly survey of economists. In March, those odds were just 20%. The latest survey was conducted July 8-14, with 34 economists responding about the chances of recession.
The Fed “has made it clear it is prepared to sacrifice growth as it desperately tries to get a grip on inflation via higher interest rates,” said James Knightley, chief international economist at ING. “This is also contributing to the strongest dollar in 20 years, which will hurt international competitiveness.”
