Nearly three quarters 53 of economists think that the Federal Reserve won’t be able bring down inflation to its goal of 2% within the next two year without causing a recession. This is according to the National Association for Business Economics poll.
Roughly 19% of respondents believed that the U.S. was already in a recession, with 53% believing that one will begin by the end of the first half of 2022, according to the poll. The data is a result of four interest rate increases by the Federal Reserve. Inflation remains at 8.5% in July, while U.S. GDP has shrunk for two consecutive quarterly. (RELATED: Twitter CFO Warns Employees That Annual Bonuses Could Be Cut In Half)
Only 3% of economists are “very confident” that the Federal Reserve will corral inflation without triggering a recession, typically referred to as a “soft landing,” with 10% “confident” and 14% “somewhat confident,” according to the poll.
JPMorgan CEO Jamie Dimon said that “something worse than a recession” could soon be upon them.
— Watcher.Guru (@WatcherGuru) August 21, 2022
Economists remained consistent in their opinions on fiscal policy over the past year, defined by the Federal Reserve as the way the government sets tax and spending policies, with 51% finding that current policy is “too stimulative” and 44% saying it is “about right,” according to the poll. Long-term interests became more prominent in 2022, with 59% of respondents arguing that the government should focus on medium-to-long term growth, up from 48% in March. The poll found that opinions on monetary policy (or the ability of central banks to reach goals like employment and stability) changed significantly after the Fed increased interest rates four times in succession. Only 44% believed that current monetary policy is “too stimulative,” down from record-highs of 77% in March, with 46% saying monetary policy is “about right,” up from 22% in March.
The amount who believe monetary policy is “too stimulative” is much higher than is typical, while the number who believe monetary policy is “about right” is much lower than is typically, according to poll results dating as far back as May 1995. According to the poll, only 9% believed current monetary policy was too restrictive. This is lower than is usual.
The report comes a week after JPMorgan Chase Chief Executive Officer Jamie Dimon told investors on an investor call that he estimated there was only a 10% chance that the Fed was able to implement a slowdown without causing a recession, Fortune reported. Yahoo! reports that Dimon thinks the Fed’s target of decreasing inflation to 4%, from 8% at the end of this year is unlikely. Finance reported last week.
The Inflation Reduction Act will have practically no impact on inflation, according to the University of Pennsylvania Penn Wharton Budget Model.
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