May 30, 2023
Moody's cuts forecasts for US GDP growth in 2022 and 2023

Moody’s cuts forecasts for US GDP growth in 2022 and 2023

Moody’s has cut its forecasts for US economic growth this year and next year as a result of tighter monetary policy to curb rising inflation. In the agency’s view, the slowdown in activity reflects factors beyond the control of the Federal Reserve (Fed, US central bank).

According to a report, the firm cut its forecast for US gross domestic product (GDP) growth in 2022 to 2.1% from 2.8% and in 2023 to 1.3% from 2.3%. According to the analysis, the unemployment rate is expected to rise from the current “low level” to between 3.6% and 4.0% next year, due to weakness in the pace of hiring and an increase in the strength of labor market participation. Work.

Consumer inflation will remain high, but Moody’s forecasts an annualized rate of 9.1% in June to 7.0% at the end of this year and 2.3% at the end of 2023.

No recession

Moody’s estimates that the Fed’s monetary policy tightening should slow U.S. economic growth but not push the country into recession. “Overall, the fundamental strength of the economy belies the notion that a recession is imminent or a guaranteed scenario,” the agency explains.

However, the company understands that inertia in the process is necessary for a more sustainable growth model. According to the analysis, macroeconomic volatility should persist throughout the year, with sudden fluctuations in indicators. “It remains to be seen whether the current strong fundamentals will help the economy withstand the ongoing currency tightening and withstand external shocks,” he pointed out.

Despite the risks, Moody’s says the U.S. can still avoid a stagnation scenario, meaning a long period of slow economic growth combined with high inflation. According to the agency, the current environment is different from the 1970s because the unemployment rate remains low and there is greater clarity about the effectiveness of monetary policy.

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