Soaring Prices and High-Intensity Tightening... "100% Probability of US Recession Within 1 Year"

[Asia Economy New York=Special Correspondent Joselgina] A prediction has emerged that the likelihood of a recession hitting the United States within the next year is virtually 100%. Analysts point to persistent inflation, a tightening financial environment, and the 'hawkish' stance of the Federal Reserve (Fed) as factors increasing concern. This is also expected to negatively impact President Joe Biden, who is facing the upcoming November midterm elections.

On the 17th (local time), Bloomberg News cited Bloomberg Economics' recession probability model, reporting that the chance of a recession within the next 12 months has reached 100%, making a U.S. recession certain. This is a sharp increase from the previous survey's 65%.

Bloomberg Economics stated, "The overall deterioration of economic and financial indicators is reflected," diagnosing that inflation, a tightening financial environment, and expectations of further Fed rate hikes are raising recession risks. This model predicts the probability of a recession within 1 to 24 months using 13 macroeconomic and financial indicators, including housing starts, consumer sentiment index, and Treasury yields. The probability of a recession within 11 months rose from 30% to 73%, and within 10 months from 0% to 25%.

Separately, a Bloomberg survey of 42 economists showed the likelihood of entering a recession within the next 12 months increased from 50% in September to 60% in October. Bloomberg News noted, "This sharply contrasts with President Biden's optimistic tone regarding economic prospects," adding, "It will also be a blow to President Biden ahead of the midterm elections."

The Wall Street Journal (WSJ) also reported the previous day that a survey of 66 economists found the average response for the probability of a recession within 12 months was 63%. This is the first time since July 2020, when the pandemic's impact was spreading, that the result exceeded 50%. In December 2007, just before the global financial crisis, it was 38%, and in February 2020, just before the COVID-19 outbreak, it was 26%.

Additionally, 58.9% of economists predicted that the Fed's excessive rate hikes could cause unnecessary economic deterioration, a higher level than the 45.6% recorded in the July survey.

Jeremy Siegel, a professor at the Wharton School of the University of Pennsylvania, also appeared on CNBC that day, warning that the central bank Fed's excessive tightening could push the U.S. economy into a deeper recession than necessary.