There is a one-in-four chance of a U.S. recession in the next 12 months, a scenario that should keep the Federal Reserve from raising interest rates next month.
These findings, from a new Reuters poll of economists, also indicate that only one rate hike is expected this year.
The median probability of a recession in the next year rose to 25% from 20% in January, according to the poll. The likelihood a recession happens during the next two years held steady at 40%, although Reuters reports that the most pessimistic call was 75%.
Other recent polls from Reuters have repeatedly shown the United States’ trade war with China as having the most “prominent downside risk for the American economy,” the article stated.
According to Reuters, “over half the economists who answered an extra question warned any further escalation in the trade war would bring the next U.S. recession. That compared to about 60% of economists in a July 2018 poll who said the trade war did not pose a significant risk.”
When taking into consideration the global economic slowdown and the shrinking outlook for U.S. economic growth, economists said the Federal Reserve’s tightening cycle will likely stop before July.
“There is a lot of uncertainty and there are some good reasons to forecast a slowdown in 2019 as compared to in 2018,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. “It certainly does makes sense for the Fed to take a pause on policy to see how things play out, because it is not impossible for the economy to slow down in 2019 between weakening global growth, tighter financial conditions and fading fiscal stimulus.”
According to the Reuters article, U.S. economic growth was forecast to slow and average 2.4% this year, a drop from January’s forecast and the lowest since April 2018.