If 2022 was the year US investors faced the reality of stalled inflation and a reactionary Federal Reserve, 2023 will be the year they learn to live with both. Neither will likely fade away anytime soon.
Next year could see a tortuous path towards a mild recession in the second half, the result of the central bank’s effort to cool jobs and curb price growth. Economists expect the Fed’s continued push to tighten monetary policy and rein in consumer spending and business activity to weigh on the job market by mid-year, leading to widespread layoffs and a rise in the unemployment rate. Loss of income will slow consumer demand as households shed excess savings and rack up credit card debt.
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