Economists expect recession, high inflation in US this year

The United States is poised to enter a recession this year and face high inflation well into 2024, a new survey citing economists has predicted.

More than two-thirds of respondents to the National Association for Business Economics (NABE) survey, as reported by the AFP news agency on Monday, saw inflation remaining above four percent in the US at the end of the year.

The survey summarized the responses of 217 NABE members and was conducted between March 2 and March 10, the organization said in a statement.

It comes as the US Federal Reserve has raised rates by 4.75 percentage points in a bid to tackle soaring inflation in the country, which touched a record level last year amid the collapse of several major American banks.

Silvergate Bank, Silicon Valley Bank, Signature Bank, and First Republic Bank all crashed within a couple of weeks, plunging the financial markets into crisis.

US Treasury Secretary Janet Yellen said on Thursday that the government used "tools to act quickly to prevent contagion" and was "prepared to take additional actions if warranted" amid the banking crisis.

"Our top priority is to protect the health of the US economy. Two weeks ago, we learned of problems at two banks that could have had significant impacts on the broader banking system and the American economy," Yellen asserted.

"We took actions to protect all depositors at the two failed institutions and provide additional liquidity for banks. This was designed to mitigate risks to the banking system."

She further noted that the owners and shareholders of the failed banks "are not being protected" by the government and the losses due to the collapse of the banks would not be covered using the taxpayers' money.

Last week’s quarter of a percentage point rise is the Federal Reserve's ninth consecutive rate rise and the highest rate since 2007. Just a year ago interest rates were close to zero.

Meanwhile, international markets have been closely watching the US Federal Reserve's moves and mounting stress in the US banking sector.

On Wednesday, European Central Bank President Christine Lagarde warned that financial tensions in the wake of the banking crisis may hit the eurozone.

"Inflation is still high, and uncertainty around its path ahead has increased. This makes a robust strategy going forward essential," Lagarde warned.

The ECB last week decided to raise its interest rates by a further 50 basis points, shrugging off the turmoil in banking markets.

ME