U.S. Fed staff saw odds of recession in next year at almost 50%

U.S. Federal Reserve staff economists briefed policymakers this month that the chances of a U.S. recession in the next year had risen to almost 50 per cent on risks of slower consumer spending, global economic risks and further interest-rate hikes.

The forecast, as detailed Wednesday in minutes of the Nov. 1-2 Federal Open Market Committee meeting, was the first such warning since the central bank began raising rates in March.

“Sluggish growth in real private domestic spending, a deteriorating global outlook, and tightening financial conditions were all seen as salient downside risks to the projection for real activity; in addition, the possibility that a persistent reduction in inflation could require a greater-than-assumed amount of tightening in financial conditions was seen as another downside risk,” the minutes said.

“The staff, therefore, continued to judge that the risks to the baseline projection for real activity were skewed to the downside and viewed the possibility that the economy would enter a recession sometime over the next year as almost as likely as the baseline.”