2023-04-21 23:48:35
It is now expected that the US inflation drop faster than originally projected, thanks to credit conditions tightened following several bank failures.
The economists reduced their projections for him consumer’s price index as well as the Personal Consumption Expenditure (PCE) index for each quarter until the first half of 2024, according to the monthly survey latest to Bloomberg economists. The survey was conducted from April 14 to 19.
Inflation in the United States reached 6% in February, but annual
With the collapse of several lenders, including Silicon Valley Bank last month, consumers and companies say that it is much more difficult to obtain credit. The effect is similar to that of raising interest rates by the Federal Reserve, which would imply fewer measures by the monetary policy authorities to reduce inflation.
Even so, it is now expected that the PCE, the Fed’s preferred inflation gauge, closing the year at 3.8% per year, almost double the central bank’s goal. Price pressures have eased in recent months, but not as fast as the authorities would like.
“Banking stresses mean much tighter credit conditions, which in an environment of rising borrowing costs, weak business confidence and a rapidly weakening housing marketmakes a hard landing for the economy look even more likely,” said James Knightley, chief international economist at ING.
Inflation expectations for 2024 grow in the US
“Inflation will slow down even more rapidly in this environmentopening the door for interest rate cuts later this year,” he said.
Economists maintained the probability of a recession in the next 12 months in 65%the highest level since mid-2020.
They revised expectations for first quarter gross domestic product to 1.8% from 1.3% on higher consumer spending. The government will release its first estimate of that figure next week.
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