Analysts Books Goldman Sachs Bank History suggests that the Fed will have the difficult task of tightening monetary policy enough to cool inflation without causing a recession in the US, with a roughly 35% chance of deflation over the next two years.
Chief Economist Jan Hatzius explained that the Fed’s main challenge is to reduce the gap between jobs and workers, and to slow wage growth to a pace in line with the 2% inflation target by tightening financial conditions enough to reduce job opportunities without sharply increasing unemployment, according to the Federal Reserve. What he wrote in a research report yesterday.
Achieving a so-called soft landing may be difficult, because historically large reductions in the gap in the US have occurred only during recessions.
“If we look at these historical patterns in nominal terms, they suggest that the Fed is facing a difficult path to a soft landing,” Hatzius said.
Hatzius added, that a recession is not inevitable because normalizing the supply of labor and prices for durable goods two years after the outbreak of the Corona epidemic, will help the Federal Reserve.
There are also more examples of other countries in the Group of Ten advanced economies – a group that also includes Belgium, Canada, France, Germany, Italy, Japan, the Netherlands, Sweden, Switzerland and the United Kingdom – emerging from the “easy landing”.
Hatzius explained that 11 of the 14 tightening cycles in the US since World War II have followed a recession within two years, but only 8 of them can be partly attributed to Fed tightening – and soft or “soft” landings have been more common recently.
He predicted that the odds of a recession during the next 12 months would be around 15%.
This comes as economists recently witnessed an increase in the chances of a recession in the United States, as 27.5% expected a contraction in a Bloomberg survey in the first week of April, up from 20% in the previous month, according to what Al Arabiya.net has seen. .
They also expect the CPI to average 5.7% in the last three months of the year, up from the previous estimate of 4.5%.