Economists at Nomura Holdings said in their latest note that they expect the US economy to witness a recession by the end of 2022, as financial conditions will tighten further on the aggressive Fed’s tightening outlook.

Key quotes

“With rapidly slowing growth momentum and a Fed committed to restoring price stability, we believe a mild recession starting in the fourth quarter of 2022 is now more likely than not.”

Excess savings and consumer balance sheets will help mitigate the speed of economic contraction.”

“Monetary and fiscal policy will be constrained by high inflation.”

 “With monthly inflation through 2022 likely to remain elevated, we believe the Fed response to the downturn will initially be muted.”

“Expect ongoing rate hikes to continue into 2023, but with a slightly lower terminal rate of 3.50-3.75% reached in February, compared to the previous forecast of 3.75-4.00% in March.” 

Also read: US Treasury Secretary Yellen: I expect the economy to slow

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