The domestic economy heads into 2024 looking to escape the shackles of a recession specter that has been hanging over the U.S. for the past two years. That might not be so easy. After all, many of the same fears that have shadowed the economy in the post-pandemic recovery remain: high prices, tight monetary policy and an uncertain geopolitical landscape. Even if the U.S. avoids an actual recession in the year ahead, finding escape velocity is likely to still be difficult. “We have a diminishing impact of all the fiscal stimulus, combined with the lagged impact of all the monetary tightening,” said Kathy Jones, chief fixed income strategist at Charles Schwab. “All that would tend to spell lower growth going forward — not necessarily a recession, although I wouldn’t rule out a mild recession at some stage of the game given how tight Fed policy is.” Indeed, the Federal Reserve for nearly two years has been aggressively trying to slow down the powerful $27.6 trillion U.S. economy, with a smattering of success. Inflation, the key factor motivating central bank policy, has receded markedly from its mid-2022 peak to about 3.2% by a gauge the Fed watches closely. While progress has been made, that’s still above the central bank’s 2% target. The employment picture , while not quite as robust as in the days following the worst of the pandemic-induced recession, is still vigorous, with another 2.5 million nonfarm payroll jobs added this year and a healthy 3.7% unemployment rate. All that has come with the Fed hiking rates another full percentage point in 2023 and a combined 5.25 percentage points since 2022. Still, there are only scant signs of a potential recession. With the Fed expected to start cutting rates in the year ahead, hopes are rising that the U.S. again can dodge the recession bullet. Path to a soft landing “Clearly, a year ago everyone was on high alert, hair on fire,” Mark Zandi, chief economist at Moody’s Analytics, said Thursday on CNBC. “The pessimism…
2023-12-30 06:32:00
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