BENGALURU (Reuters) – There is a one-in-four chance of a U.S. recession in the next 12 months, a scenario that should keep the Federal Reserve from raising interest rates next month, according to a Reuters poll of economists who now expect only one rate hike this year.
Given a global economic slowdown and a dimming outlook for U.S. growth, economists said the Fed’s tightening cycle will likely draw to a halt before July.
While financial markets have recovered from a deep sell-off late last year, the Feb 8-14 poll of over 110 economists showed a cut to the outlook for U.S. economic growth and the number of Fed rate hikes this year and next.
“There is a lot of uncertainty and there are some good reasons to forecast a slowdown in 2019 as compared to in 2018,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics.
“It certainly does makes sense for the Fed to take a pause on policy to see how things play out, because it is not impossible for the economy to slow down in 2019 between weakening global growth, tighter financial conditions and fading fiscal stimulus.”
U.S. economic growth was forecast to slow and average 2.4 percent this year, a downgrade from January and the lowest since April last year.
ENGLISH TRANSLATION: THEY ARE PUTTING THE EUROPEAN BANKS BACK ON "LIFE SUPPORT"
— thomas (@VolumeDynamics) February 15, 2019
China slowdown scares may have peaked already, but spill-over effects haven't.
Expect Euro area and US export orders to continue to suffer from China effects.
— AndreasStenoLarsen (@AndreasSteno) February 15, 2019
This is what the European Commission called "robust recovery"?
European car sales plummet in January after five months of bad data. pic.twitter.com/RELs6HdSPu
— Daniel Lacalle (@dlacalle_IA) February 15, 2019
Collapsing US Economic Surprise Index is telling me that the stock market should go lower from here pic.twitter.com/jfpDyYablE
— Alastair Williamson (@StockBoardAsset) February 14, 2019
An economic thread you probably shouldn’t read or be concerned with….
1/NY FED RECESSION PROBABILITY
HIGHEST LEVEL SINCE JULY 2008, WHEN WE WERE ALREADY IN RECESSION FOR 8 MONTHS pic.twitter.com/YSs2w7vdLO
— OCCUPY WISDOM (@OccupyWisdom) February 15, 2019
Federal Reserve Governor Lael Brainard says “downside risks” are increasing for economic growth.
The central bank official tells CNBC the Fed “is in a good place” now. It has paused its interest rate hikes.
In addition, she says the balance sheet reduction program that began in October 2017 probably should end “later this year.”
The U.S. economy’s estimated growth rate in the fourth quarter was slashed to 1.5% from 2.7% by the Atlanta Federal Reserve after declines in retail sales and inventories.