WASHINGTON – A Federal Reserve Bank of New York model projects that there is an 80 per cent chance the United States will experience a 1990’s style recession, reported Sputnik, quoting five of the central bank’s researchers in a blog post.
Earlier this week, the Federal Reserve announced the highest US interest rate hike in 28 years to fight inflation, with Chairman Jerome Powell denying the central bank was pushing the country toward a recession even as he expressed doubts a “soft landing” for the economy can be achieved.
“The chances of a hard landing – defined to include at least one quarter in the next ten in which four-quarter GDP growth dips below -1 percent, as occurred during the 1990 recession – are about 80 per cent,” the post said on Friday.
The analysts said the projection, generated by the bank’s dynamic stochastic general equilibrium (DSGE) model, does not represent an official New York Fed forecast.
According to the model, the researchers explained, there is only a 10 per cent chance of a “soft landing,” defined as four-quarter GDP growth staying positive over the next ten quarters.
The model also projects inflation to remain elevated in 2022 at 3.8 per cent, up a full percentage point relative to March, the post added. In addition, the forecast says inflation will decline only gradually toward 2 per cent thereafter – including 2.5 and 2.1 per cent in 2023 and 2024, respectively.
The post was authored by five central bank analysts including New York Fed Macroeconomic and Monetary Studies economic advisers Marco Del Negro and Andrea Tambalotti along with senior research analysts Aiden Gleich, Shlok Goyal, and Alissa Johnson.