These forecasts will be good news for President Joe Biden, who would bear the brunt of the political consequences if a recession occurs before the 2024 election.
However, there is no guarantee that other factors won’t complicate the Fed’s job in shaking up the economy: soaring oil prices and the auto workers’ strike can potentially trigger a temporary rise in inflation, while a looming government shutdown could hurt growth, depending on how long it drags on.
For now, Fed officials’ inflation outlook remains largely unchanged. They still expect their preferred inflation measure, the personal consumption expenditures index, to fall to 2.5% next year and barely above their 2025 target of 2%.
This index shows that prices rose 3.3 percent in the 12 months ending in July – still above the Fed’s 2 percent target but much better than the pace of inflation in Last year.
Fed officials are divided on the need for another rate hike this year, with 12 predicting another hike will be necessary and the other seven saying the central bank will be able to maintain its current stance .
The Fed’s main borrowing rate is between 5.25% and 5.5%, just a year and a half after it was near zero – the fastest rise in four decades.