As expected, the probability that a recession will start in the U.S. economy has breached the 80% threshold over the past six weeks.
That development occurred despite the Federal Reserve's decision to pause its series of rate hikes that began back in March 2022 at the end of its 14 June 2023 meeting. Now, on the cusp of its July 2023 meeting, the Fed looks set to implement another quarter point rate hike in the Federal Funds Rate.
Doing that however will prompt the odds of recession to increase a little faster. The rise in that probability had slowed during the past six weeks in the absence of a rate hike in June 2023.
The latest update to the Recession Probability Track shows how the recession odds are progressing.
The Recession Probability Track shows the current probability of a recession being officially determined to have begun sometime in the next 12 months, between the dates of 24 July 2023 and 12 July 2024, is 80.8%.
In six weeks, the probability the National Bureau of Economic Research will identify a month between September 2023 and September 2024 as marking a peak in the U.S. business cycle before the economy enters a period of contraction will be higher.
Analyst's Notes
The Recession Probability Track is based on Jonathan Wright's yield curve-based recession forecasting model, which factors in the one-quarter average spread between the 10-year and 3-month constant maturity U.S. Treasuries and the corresponding one-quarter average level of the Federal Funds Rate. If you'd like to do that math using the latest data available to anticipate where the Recession Probability Track is heading, we have a very popular tool to do the math.
For the latest updates of the U.S. Recession Probability Track, follow this link!
Previously on Political Calculations
We started this new recession watch series on 18 October 2022, coinciding with the inversion of the 10-Year and 3-Month constant maturity U.S. Treasuries. Here are all the posts-to-date on that topic in reverse chronological order, including this one....
- Probability of Recession Starting in Next 12 Months Breaches 80%
- U.S. Recession Probability on Track to Rise Past 80%
- U.S. Recession Probability Reaches 67%
- U.S. Recession Probability Shoots Over 50% on Way to 60%
- Recession Probability Nearing 50%
- Recession Probability Ratchets Up to Better Than 1-in-6
- U.S. Recession Odds Rise Above 1-in-10
- The Return of the Recession Probability Track
Image credit: Recession by Mike Lawrence via flickr. Creative Commons. Attribution 2.0 Generic (CC BY 2.0).
Labels: recession forecast
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