In a new report today, the World Bank estimates that Fed rate hikes already in place will reduce US GDP by 2.4 percentage points this year:
As a result, the Bank has reduced its estimate of 2023 growth to 1.1% and 2024 growth to 0.8%:
The Bank says explicitly that reduced growth, both here and in Europe, is a direct result of the Fed's rate hikes:
After growing 1.1% in 2023, the U.S. economy is set to decelerate to 0.8% in 2024, mainly because of the lingering impact of the sharp rise in interest rates over the past year and a half. In the euro area, growth is forecast to slow to 0.4% in 2023 from 3.5% in 2022, due to the lagged effect of monetary policy tightening and energy-price increases.
If the World Bank is right, their analysis suggests the US economy will achieve the widely fabled "soft landing": low growth but no recession. I have my doubts about that, since I think the size of the Fed's rate hikes is likely to slash growth more than 2.4%, but I might well be too pessimistic. We'll see.
Dude. For a whole year you've been prognosticating a Fed-triggered recession, even quietly adjusting your timeline for when this recession is supposed to arrive.
You're not just too pessimistic, you're dogmatically insistent on being pessimistic.
He also seems to think they suddenly hit all at once.
Kevin may be wrong (I hope he is) but the trend of the last eighteen months or so definitely suggests much slower growth. In 2022 the US economy slowed markedly (faster slowdown than the EU) and Q1 of 2023 clocked in at an annualized rate of 1.4%. And money is tighter now than it was at the beginning of Q1. I mean, it would hardly be shocking if the US slips into a technical recession at some point in the next year, right? Although, again, I hope we avoid that fate (the World Bank seems to think we will).
FWIW the IMF is a bit more optimistic than the World Bank (or at least it was as of April).
https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023
Just about every long-term series shows a pandemic bump: inflation, spending, factory orders, etc. Coming back down from that bump is just a reversion to long-term trends.
Arbitrarily cutting off data at 2022, or 2021, or 2020 looks like an attempt to selectively create supporting data for a predetermined narrative.
The benefit of tightened money at a time when the economy is red hot, is that the Fed will once again have lots of ample room for loosening monetary policy. Or as I keep asking, what does it say about the structure of our economy if we must stay at the ZLB in good times and bad?
As Mark Zandi and Justin Wolfers both noted recently, it's unlikely/impossible for the US to enter a recession in 2023.
Did Kevin predict a Fed-triggered recession, or say that if we land in a recession it will have been Fed-triggered