Elon Musk, Nouriel Roubini and Goldman Sachs Group have joined the growing chorus of pundits predicting an economic recession in the US.
According to tech billionaire and Tesla co-founder Musk, a recession is inevitable. "A recession is inevitable at some point. As to whether there is a recession in the near term, that is more likely than not ... It is not a certainty, but it appears more likely than not," Elon Musk told Bloomberg News Editor-in-Chief John Micklethwait on Tuesday.
'We are Getting Very Close'
Economist Nouriel Roubini, who has predicted economic events in the past with accuracy, says a recession will set in by the end of the year. "We're getting very close," he said, according to Bloomberg. Roubini said consumer confidence is dipping even as sectors like retail sales, manufacturing and housing are slowing down.
Meanwhile, economists at Goldman Sachs lowered US growth forecasts, saying the risk of recession is increasing.
"We now see recession risk as higher and more front-loaded ... The main reasons are that our baseline growth path is now lower and that we are increasingly concerned that the Fed will feel compelled to respond forcefully to high headline inflation and consumer inflation expectations if energy prices rise further, even if activity slows sharply," Goldman economists wrote in a note, according to Bloomberg. The analysts say there is a 30 percent probability of recession happening over the next year.
The US central bank rolled out a 75 basis point hike in the interest rates last week as inflation remained critically above target rates. The rate hike announced by the Federal Reserve is the largest increase in more than a quarter of a century.
The rate hike was widely expected but the hawkish language of the central bank has stymied hopes of an economic turnaround and is expected to slow demand. The new rate for the target federal funds is in the range of between 1.5% and 1.75%.
World Bank Warning
Earlier this month, the World Bank warned that the global economy is likely to face the risk of 'stagflation', which happens when high inflation is accompanied with low growth. This scenario will invariably push many countries into recession, the Bank warned.
The World Bank also slashed its forecast for global growth this year to 2.9 percent, which is remarkably lower than the 4.1 percent growth it forecast in January. The World Bank also lowered the rate of economic growth in the United States. It said it downgraded 2022 growth to 2.6 percent from 3.8 percent projected earlier.
Also this month, JPMorgan Chase CEO Jamie Dimon warned that the US economy is heading into 'hurricane' triggered mainly by the Ukraine war but aggravated by the inflation pressures and the Federal Reserve's rate hikes.
"Right now it's kind of sunny, things are doing fine. Everyone thinks the Fed can handle this ... That hurricane is right out there down the road coming our way," Dimon said. His comments came after the central bank's Beige Book report said US economic growth has 'downshifted' due to the rising interest rates and inflation.
"There's a path. It's a narrow path ... But I think the Fed has very powerful tools. It's hard to finely tune them, and it's hard to see the effects of them quickly enough to alter it, but I think they're responding well. It's definitely a risk," he said.