The New York Fed Rings Recession Alarm As Likelihood Hits Highest Levels Since 1982
Key takeaways
- The New York Fed’s yield curve model now says a recession is 58% likely, the highest figure since 1982
- The Fed is now predicting a recession will happen by 2024
- Monetary tightening policies can either result in a soft or hard landing — the jury’s still out on which we’ll get
Recession worries are rumbling this week as the New York Fed revealed a 58% chance of a recession, according to its modeling. The markets have been gloomy as the global economy worsened. We’ve got the latest on whether a hard or soft landing is predicted.
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What did the New York Fed say?
The New York Fed has a model that predicts a recession’s likelihood. That indicator is now at a 58% probability — the highest since 1982. New York Fed president, John Williams, said on Wednesday inflation was still too high and another interest rate hike was justified based on the data.
Investors are waiting to see what happens at the next Fed meeting. It’s been more of a downbeat week on the global markets, despite robust Q1 earnings reports from the US banks. S&P 500 futures slid down 0.7%, while the Dow Jones Global is 0.23% on Thursday. The UK’s FTSE 100 declined 0.21% at the news the UK is the only European country to have double-digit inflation still.
Are we heading towards a recession?
There are two results from tightening cycles: a hard or soft landing. A hard landing is possible, given we’ve already seen two banks collapse under the pressure of high interest rates. Despite the Fed’s best efforts some data isn’t playing ball, like core CPI accelerating slightly last month. The Fed itself is now predicting a “mild recession” by 2024.
Then there’s the fabled ‘soft landing’ the Fed wishes for, where we squeak past a recession by bringing down inflation without tanking the jobs market. Core inflation is now at 5%, down from a high of 9.1% in June 2022, dropping a whole percentage point from February to March.
Unemployment is still low, though it’s slowly creeping up each week. The Fed might be lucky and get the balance just right, resulting in a short and shallow recession.
The bottom line
It’s definitely an uncertain time, with another interest rate hike in May looking increasingly likely. As an investor, the best way to prepare for the unexpected is to get the basics in check. Shore up your emergency fund, diversify your portfolio and take a long-term view with investments to weather the storm.
You can also let AI take the wheel with your investments. Q.ai’s Foundation Kits use a unique AI algorithm to analyze the data for you and find the best deals on the market each week to help you stay in the game. Worried about losing your returns? Just switch on Portfolio Protection, which can help protect those precious gains.
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