More than three-quarters of business economists expect the U.S. to enter a recession by the end of 2021, though a majority still estimate the Federal Reserve will continue raising interest rates this year.
Ten per cent saw a recession beginning this year, 42 percent project one next year, while 25 percent expect a contraction starting in 2021, according to a semiannual National Association for Business Economics survey released Monday.
The rest expect a recession later than 2021 or expressed no opinion, the Jan. 30-Feb. 8 poll of nearly 300 members showed.
“There is a schism between what the NABE panel and the markets think about the Fed’s rate path and the shrinking of its balance sheet,” said Megan Greene, chief economist at Manulife Asset Management and chair of the survey. “Markets are pricing in no more interest-rate hikes in 2019, whereas a majority of the NABE panel expects one or two rate hikes.”
President Donald Trump’s trade policies remained a concern for most of the panelists. Thirty-six percent said the existing tariffs, if they remain in place, will reduce 2019 gross domestic product growth by 25 basis points, while 26 percent saw a drag of 50 basis points and 15 percent of panelists expect the reduction to exceed 50 basis points.
Also, the Economists also expect the tariffs to boost inflation this year.