A survey taken by the National Association for Business Economics (NABE) reveals that 75 percent of economists believe a downturn in the US economy will happen in the next three years and that about 10 percent of them see it happening this year, while approximately 42 percent predict a recession to happen in 2020 and some 25 percent say it will happen in 2021.
The Federal Reserve has, over the last three years, been tightening the monetary ‘purse strings’, but has given signals to pause this strategy and this is causing growing concerns.
According to the NABE’s survey that was released on Monday morning, the US economy is slated to fall into a recession by 2021.
Approximately 300 economists at major institutions who are members of the NABE were asked for their views between January 30 and February 8, 2019 and the survey disclosed that about 10 percent of them see it happening this year, while approximately 42 percent predict a recession to happen in 2020 and some 25 percent say it will happen in 2021.
Of all the economist surveyed, at least 77 percent of them are predicting a recession within the next thee years. Whereas at the other extreme about 11 percent see the US economy avoiding a recession over the next three years.
Interest rates were raised four times last year by the Federal Reserve. Currently, however, the Federal Reserve and Jerome Powell, its chairman have given assurance to be forbearing on rates. Most economists believe this means the Fed is done raising rates for at lest a few months while investors are expecting no raise at all this year. However, NABE survey revealed that at least 39 percent of economists expect to see at least one rate increase while 26 percent believe the Federal Reserve will raise rates twice this year.
The slowing down on interest rate hiking cycle by the Federal Reserve is usually a sign that a recession is likely to happen.
Albert Edwards, who is considered to be a notoriously bearish strategist at Societe Generale, said in a recent note, “the end of the Fed tightening cycle is more often than not, a prelude to recession.
Currently there are two cities who are experiencing recession: Elmira, New York and Danville, Illinois.
However, according to the NABE three quarters of the economists surveyed approve of the Federal Reserve’s management of interest rates and say that the Fed’s policymaking is about right.