The US economy Right Now
The strong economic status of the power nation USA is falling now. It is definite that the US will face a big hit of recession in the second half of the year 2023. Although, the US is continuously providing good job opportunities to people which is quite visible through the drop-in unemployment rate in September 2022. Being one of the strongest economies the US has always showcased the strength of its economy in the world but in 2023 the nation will get badly affected by inflation, approximately 65%.
Banking Sector’s Indication
It is predicted by the US banking sector as well that the economy of the nation would surely go through tough times this year. Most of the economists of big financial organisations have indicated that recession is approaching and will surely affect economic structure of the nation. The Federal Reserve is still quite positive about Labour sector’s fight against inflation. As IMF Official Gita Gopinath said that it is too early to announce a complete victory over inflation as well recession. Inflation has not turned the corner yet, said by IMF officer. She added that it is still required to continue the interest hikes to face the opposite plights. This information is given by IMF official after viewing Fed Minutes’ Wednesday release. The present situation of market is still problematic as it seems inflation is getting down, but it is only temporary. The banking sector needs to rise interest rates until the wages get a decline in escalation instead of food or energy tariffs. Therefore, it is advisable for Federal Reserve to stay on the current pathway for some time until situation get sorted.
Current Inflation Rates
The inflation was counted as 7.1% in November 2022 which is somewhat below the expected rates of financial experts. However, inflation hike is estimated for 9.0% which would be higher than last four decades. As per Fed’s action in defence of inflation can put US economy into risk of recession which would worsen the situation further. Moreover, the falling prices of gas ($3.22 per gallon) are soothing for Americans which were $5 per gallon. As if inflation rates would stop rising in spring as per the announcement of Central Bank of the nation, then it would give a sigh of relief to people.
Connection between Inflation and Recession
There is direct link between these two as if one faces rise the another will automatically get higher. The present scenario opted by Fed is to ease the plight is working to ease down the situation however it is not stagnant. The two points down inflation rates has shown some success to this strategy of Fed which was supposed to be 7.3%. if the situation goes in a similar tune, then there will be less space for recession. But if the inflation will be higher than the estimated hike of 2% then it will hinder the growth of US economy. So, it is wished by economists to get favourable circumferences in near future.
Markers of Inflation
There are number of indicators of rising inflation in the nation. First and foremost is the tariff of basic needs such food and energy is making life tough. The price of eggs is skyrocketed. Secondly, the unemployment, however it is argumentative topic among the financial experts. Some assert that there is visible hike in jobs in November with 263000. But others opine that there are less jobs than before. It is shown in the increasing number of unemployment filings with 225000. The total number of jobs is still higher than pandemic period. To deal with this uncertain plight, the guidance of financial expert is crucial. According to Mark Zandi, it is necessary to stop the spend thrifting by people otherwise economy will harsh results.