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US President Joe Biden conceded that a “slight” recession was a possibility following a downcast IMF economic forecast due to inflation and the Russia-Ukraine war. In an interview with CNN, Biden said, “I don’t think there will be a recession…If it is, it’ll be a very slight recession. That is, we’ll move down slightly.” He said that the US economy is resilient enough to ride out the turbulence.
Yesterday, the International Monetary Fund (IMF) cut its US growth forecast for 2022 to 1.6% and held it at 1% for 2023. The IMF trimmed its forecast for global growth in 2023 and warned of a worsening outlook for the global economy.
The US President ticked through legislative accomplishments intended to cut costs for US households, such as drug price provisions in the Inflation Reduction Act, and said they would cushion the blow of any stagnation or downturn and signaled a distrust in experts’ warnings.
“Every six months they say this,” he said of recession warnings. “There’s so much that’s been accomplished that the idea that there’s something — there’s an automaticity to a recession, and it’s just not — it’s just not there.”
When asked if citizens should prepare for a recession, Biden replied: “No.”
Bloomberg Economics’ recession probability model in September pointed to a 30% chance of a downturn starting within the next 12 months.
Previously, Biden said he never expect a recession, and had disagreed with Republicans or analysts who have warned that a downturn of some measure is a possibility, if not a likelihood or near-certainty.
The president told the Associated Press in June that a recession was “not inevitable”; but since then, the Fed has maintained aggressive rate increases and inflation has remained stubbornly high, narrowing the path for a so-called soft landing that cools price growth without a downturn.
A month later, Biden said he thought the low jobless rate would carry the economy through without a contraction.
“We’re not going to be in a recession,” he said in July. “We’ll see some coming down. But I don’t think we’re going to — God willing, I don’t think we’re going to see a recession.”
The Fed isn’t officially forecasting a recession but its officials do expect unemployment to rise over the next year and Chair Jerome Powell has warned that there may be economic pain coming from the central bank’s steep rate hikes.
The Fed is poised to deliver its fourth-straight 75-basis-point hike when it meets early next month, just days before the midterms.
“At this point, the larger risks come from tightening too little and allowing very high inflation to persist and become embedded in the economy,” Federal Reserve Bank of Cleveland President Loretta Mester said Tuesday during an event with The Economic Club of New York.
The Department of Labor will release the latest inflation numbers Thursday, the last release before Election Day. The median estimate of economists surveyed by Bloomberg is for an 8.1% annual rate – the lowest since February.
A Monmouth poll conducted in late September showed 82% of Americans called inflation an extremely or very important issue and 30% approve of Biden’s handling of the issue. On jobs and unemployment, 68% said the issue was extremely or very important, with 43% approving of the president.
(With Bloomberg inputs)
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