Add another prominent voice in business warning of a looming recession.
“I’d say it’s probably more like a coin toss that the economy will slide into recession by the end of the year,” Vince Reinhart, chief economist and macro strategist at Dreyfus and Mellon, said on Yahoo Finance Live.
Reinhart’s comments come amid several negative forces at play in the economy.
The consumer price index (CPI) rose 7.9% in February, marking the fastest pace of annual inflation in 40 years, while prices for rent, groceries and used cars soared. As reported by Yahoo Finance’s Alexandra Semenova, Tuesday’s CPI could show an increase north of 8% from the March headline.
Meanwhile, the personal consumption expenditure (PCE) index rose 6.4% in February, accelerating from a 6.1% rise in January.
That was the highest inflation rate since 1982.
Hot inflation figures in recent weeks have led Fed members like Lael Brainard to engage in more hawkish talks about rate hikes. This tough anti-inflation talk could continue this week as Brainard and other closely watched Fed members speak at various events.
With high inflation and rising interest rates — which have pushed 30-year mortgages to 5% — many economists are warning of an imminent recession by sometime in 2023. Deutsche Bank’s Matthew Luzzetti was the first major investment economist to made a call recession a week ago.
He’s not alone.
“If we think of a mild recession, the best example is probably what happened in 2021, maybe a 2 percentage point rise in the unemployment rate, a couple of quarters of weak GDP growth,” Dent said. “In terms of time readiness, we are most concerned about 2024. We believe the cumulative risk of a recession by the end of 2024 is around 35% to 40%. A lot of that just comes from what we think is going to be this very aggressive response from the Fed to actually get inflation under control and make sure the job market actually cools down,” Nomura chief economist Robert Dent said on Yahoo Finance Live .
The story goes on
Dent added, “We broadly agree that the inflationary situation the Fed faces will be quite an enigma for them and will be difficult to navigate.”
For his part, Reinhart expects the Fed to raise interest rates three times by 50 basis points soon.
Reinhart explained: “The yield curve is being inverted by many measures. Oil prices are significantly higher. The Fed is tightening. We are approaching full employment. Trees don’t grow to the sky in a year and a half or so, so think of a recession as an easy coin toss.”
Brian Soci is a freelance editor and Anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and further LinkedIn.
Follow Yahoo Finance on Twitter, Facebook, Instagram, flipboard, LinkedIn, youtubeand reddit
Comments are closed.