‘Ugly’ inflation numbers make a recession more likely in 2022, economist says

The probability of a recession increases as inflation increases. There could be more layoffs, fewer jobs and higher interest rates in the future.

The median probability of a recession is higher than it was in June.

A recession is defined by the National Bureau of Economic Research as a decline in economic activity that lasts more than a few months and is spread across the economy.

Inflation is one of the reasons a recession is imminent. The year-over-year inflation rate last week was 9.1%, the highest rate in 33 years.

According to recent forecasts, a recession could occur earlier in the future than previously thought.

Bank of America followed an earlier forecast by a Japanese investment bank, predicting a "mild" recession in the rest of the year. Earlier forecasts only predicted slowing economic growth.

Wells Fargo changed its outlook from a soft landing to a recession in the first quarter of 2020.

The May and June inflation data from various sources is a key factor in the revised outlook. He says June's numbers are ugly and that inflation is becoming more entrenched.

Real disposable income is being eroded by it.

The decrease in consumer spending is a sign of a recession. According to a forecast by Wells Fargo, consumer spending will decline by September due to more people dipping into their savings.

The consumers have held the line in terms of spending. They have reduced their savings rates and increased their credit card debt. In the long run, those things aren't sustainable.

The Federal Reserve is all but certain to raise interest rates at its meeting at the end of the month. Atlanta Fed President Raphael Bostic says that a 1% interest rate hike is in play and that the only question is whether it will be a 0.05% interest rate hike.

Businesses and consumers can be affected by rate hikes. Demand for goods and services can be discouraged by this.

Extra costs on loans and credit cards, car financing, and mortgage costs can be added to by higher interest rates. The increases would be even more stark if a 1% hike happened.

An associate dean at Boston College says inflation needs to be controlled. Wage growth is not keeping pace with inflation.

The question is whether we will be able to do that without hurting the economy.

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