After a brutal week for markets, Fed Chair Jerome Powell will testify before Congress about the central bank’s increasingly aggressive plan to fight inflation.
. Jobless claims are beginning to trend higher as reports of layoffs at tech firms grow. And all oil prices show no signs of falling back below $100 per barrel as the summer travel season kicks off.
In a note to clients on Friday, Bank of America global economist Ethan Harris described the U.S. economy as"one revision away from recession." "Our worst fears around the Fed have been confirmed: they fell way behind the curve and are now playing a dangerous game of catch up. We look for GDP growth to slow to almost zero, inflation to settle at around 3% and the Fed to hike rates above 4%," Harris wrote.
Even among more optimistic economists, the outlook calls for a rather bumpy landing. JPMorgan's Michael Feroli said in a note Friday that he expected Powell to be"largely successful" in balancing fighting inflation with economic growth, but a recession is a distinct possibility. "This desired soft landing is not guaranteed, and Fed chair Powell himself has noted that achieving this goal may not be entirely straightforward. And with a tight labor market and the economy dealing with the shocks of tighter financial conditions and higher food and energy prices, recession risks are notable as we think about the next few years," Feroli wrote.
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