(Reuters) – Ratings agency Fitch has slashed growth forecasts for the United States for this year and next and will warn on Tuesday that the Federal Reserve’s interest rate hikes and inflation will drive the U.S. economy into a 1990-style recession, CNN said.
U.S. GDP is now expected to grow by just 0.5% next year, down from 1.5% in the firm’s June forecast, CNN reported, citing a Fitch report obtained by them.
Economists at Fitch expect recession in the country to be quite mild and the rise in unemployment rate from 3.5% currently to 5.2% in 2024, which implies loss of millions of jobs, but lesser than those lost during the prior two recessions, the report said.
Fitch believes that high inflation will “prove too much of a drain” on household income next year, shrinking consumer spending which will lead to a downturn during the second quarter of 2023, the report added.
U.S consumer prices increased more than expected in September and underlying inflation pressures continued to build, reinforcing expectations that the Federal Reserve will deliver a fourth 75-basis points interest rate hike next month.
Despite the continued moderation as supply chains ease and oil prices retreat from the highs seen in the spring, inflation is running way above the Fed’s 2% target.
(Reporting by Akriti Sharma and Shivani Tanna in Bengaluru; Editing by Andrew Heavens and Chizu Nomiyama)
