US economists lowered their expectations for the consumer price index and the spending price index in the first half of 2024, according to Bloomberg’s monthly survey of economists.
According to consumers and businesses, it has become more difficult to get a loan after the failure of several US banks, including Silicon Valley Bank. This has the same effect as when the Federal Reserve raises interest rates, because now politicians have less to do to bring inflation down.
3.8 percent
Despite the accelerating decline, the Fed still expects the US to face year-end headline inflation of 3.8%. This is almost double the 2% target. Nonetheless, pressure on US prices has eased in recent months, albeit not as much as policymakers had hoped.
“Stress among banks means lending conditions are getting much tighter, meaning a hard landing for the economy is increasingly likely in times of higher borrowing costs and a rapidly weakening housing market,” said James Knightly, ING’s chief international economist. “Inflation will slow much faster under these circumstances, leaving opportunities for interest rate cuts.”
The probability of a recession in the next 12 months is more than 65%, the highest since spring 2020, according to economists polled by Bloomberg.