What will the next economic recession be except?

• Recessions are notoriously difficult to forecast, but there is growing agreement among big banks.
• Bank of America, and Deutsche Bank, etc are among the most prominent firms forecasting.
• Famous economists that a slump is on the way.

Recessions are notoriously difficult to forecast, but there is growing agreement among big banks and famous economists that a slump is on the way as the Federal Reserve ramps up its assault on inflation.

As it enters full inflation-fighting mode, the Fed hopes to accomplish the rarest of economic feats: lowering consumer demand enough to limit price increases without crushing it so badly that the country enters a recession. Although Fed policymakers are hoping to reach that elusive sweet spot, known as a soft landing, history shows that the US central bank frequently struggles to successfully thread the needle between tightening policy and maintaining economic growth.

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HOW THE FEDERAL RESERVE MISSED THE MARK ON SURGING INFLATION

Bank of America, Deutsche Bank, Wells Fargo, and Goldman Sachs are among the most prominent firms forecasting a recession within the next two years, as the Federal Reserve of the United States moves to aggressively tighten monetary policy in order to cool consumer demand and bring inflation back down to its target of 2%.

While the economy remains relatively solid for the time being, there are rising indications that Wall Street may be correct: The Bureau of Labor Statistics stated earlier this month that gross domestic product unexpectedly fell in the first quarter of the year, marking the worst result since the spring of 2020, when the economy was still deep in the grip of the COVID-induced recession.

Recessions are formally defined as two consecutive quarters of negative economic growth, with high unemployment, low or negative GDP growth, declining income, and weakening retail sales. However, they differ greatly in how they emerge, making forecasting equally problematic.

Alan Blinder, a former Federal Reserve Board vice-chairman and Princeton economist, recently found 11 Fed tightening cycles since 1965, eight of which were followed by recessions. The majority of the downturns were minor: there were five instances where GDP fell by less than 1% or there was no economic decline at all.

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