Fed Official: Risk of Recession Rising

Federal Reserve Bank of Cleveland President Loretta Mester said the risk of a recession in the U.S. economy is increasing, and that it will take several years to return to the central bank’s 2% inflation goal. Treasury Secretary Janet Yellen said Sunday that “unacceptably high” prices are likely to stick with consumers through 2022 and that she expects the U.S. economy to slow down, “But I don’t think a recession is at all inevitable.” Meanwhile, an economic model maintained by Federal Reserve Bank of New York economists suggests the chance of achieving a “soft landing” for the U.S. economy is just 10%. “According to the model, the probability of a soft landing — defined as four-quarter GDP growth staying positive over the next ten quarters — is only about 10%,” the economists wrote in a blog post published Friday on the bank’s website. “Conversely, the chances of a hard landing — defined to include at least one quarter in the next ten in which four-quarter GDP growth dips below -1%, as occurred during the 1990 recession — are about 80%.” In the blog post, the New York Fed economists noted the “model forecast is not an official New York Fed forecast, but only an input to the Research staff’s overall forecasting process.”

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