Fed Signals No Interest Rate Hikes in 2023 as U.S. Economy Faces Risk of Recession

The U.S. economy ended 2022 on a solid footing, with the Gross Domestic Product (GDP) expanding at a 2.9% annual pace from October through December, according to the Commerce Department. This was a slight deceleration from the 3.2% annual growth rate posted from July through September.

The economy was bolstered by resilient consumer spending and businesses restocking supplies. However, most economists believe the economy will slow further in the current quarter and slide into at least a mild recession by midyear.

“The economy is still growing, but the pace of growth is slowing,” said Mark Zandi, chief economist at Moody’s Analytics. “The economy is likely to slow further in the first half of this year, and there is a significant risk of a recession.”

The Federal Reserve has signaled it is unlikely to raise interest rates this year, and some economists believe the central bank may even lower rates to help stimulate the economy.

“The Fed is likely to remain on the sidelines this year,” said Michael Gapen, chief U.S. economist at Barclays. “There is a risk that the economy could slip into a recession if the consumer weakens.”

The U.S. economy ended the year with momentum, despite the pressure of high interest rates and fears of a looming recession. However, economists are warning that the economy could slow further in the current quarter and slide into at least a mild recession by midyear.