Staff members at the central bank, who brief policymakers before interest rate decisions, had long expected GDP growth to slow this year in the wake of the Fed’s fight against inflation. But last month they upped the odds of a downturn, according to the minutes of the Fed’s March 21-22 meeting.
Just a couple of weeks before the meeting, two regional lenders — Silicon Valley Bank and Signature Bank — collapsed after depositors pulled out billions of dollars in cash, sending tremors throughout the industry.
Politics
BREAKING: Fed Economists Finally Admit A Recession Is Coming This Year
Federal Reserve economists are finally admitting in the wake of multiple bank failures that an economic recession is coming this year, signaling a potential blow to President Joe Biden’s re-election hopes.
According to a new report in Politico, staff at the central bank are now more confidently projecting a downturn after regional lenders Silicon Valley Bank and Signature Bank both failed, which they fear will cause “cash to flow less freely through the economy as lenders are less willing to part with it.”
Politico reports:
Their projection was for “a mild recession starting later this year, with a recovery over the subsequent two years,” according to the minutes, released Wednesday. That would spark a jump in unemployment. They estimated the economy would fully recover by 2025.
The economic outlook is always difficult to foretell with any confidence, and staff members underscored their uncertainty at the meeting. If banks don’t pull back on lending as much as they expect, then the economy might not suffer as much. But if the financial system were to face even more stress, then the prognosis could be much worse.
“Historical recessions related to financial market problems tend to be more severe and persistent than average recessions,” Federal Reserve staff reportedly noted in its meeting minutes.
At the March meeting, the Fed projected meager 0.4 percent economic growth — a rate so slow that it could dip negative, Politico says, while they expect a rise of roughly a percentage point in unemployment, which would be consistent with a contraction in the economy.
Fed policymakers are considering another interest rate hike in May.
