Stubborn inflation and the Federal Reserve’s jumbo-sized interest rate hikes will drive the American economy into a 1990-style mild recession starting in the spring, Fitch Ratings warned on Tuesday
. In a report obtained first by CNN, Fitch slashed its US growth forecasts for this year and next because of one of the most aggressive inflation-fighting campaigns by the Fed in history. US GDP is now expected to grow by just 0.5% next year, down from 1.5% in the firm’s June forecast. High inflation will “prove too much of a drain” on household income next year, Fitch said, shrinking consumer spending to the point that it causes a downturn during the second quarter of 2023.
Today’s period of high energy prices is linked in large part to Russia’s invasion of Ukraine, a conflict that has also raised food prices. The 1990-1991 recession helped doom the political fortunes of then-President George H.W. Bush. In the 1992 race for the White House, Arkansas Governor Bill Clinton blamed Bush’s policies for the recession and a Clinton strategist coined the phrase, “It’s the economy, stupid,” highlighting the importance of that issue for voters.
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