Tags: san | francisco | Fed | Chance | Recession

San Francisco Fed Sees Significant Chance of Recession in Next Two Years

Monday, 09 Aug 2010 03:14 PM

There is a "significant" chance the U.S. economy will slip back into recession in the next two years although a reversal is unlikely in the next few months, researchers at the San Francisco Federal Reserve Bank said on Monday.

The probability of another recession during the next 18 to 24 months is higher than that of expansion, researchers said in the latest issue of the regional Fed bank's Economic Letter.

Concern has risen in recent months that the United States might be headed for a double-dip recession as measures of consumer spending and confidence have dropped and private company hiring has fallen short of expectations.

The soft economic data will be in the spotlight tomorrow when members of the Fed's monetary policysetting committee meet. Recent comments from Fed officials signal strong disagreement over whether the Fed — the U.S. central bank — should move to offer further support to the economy than it already has.

The researchers — Travis Berge, a graduate student at the University of California, Davis, and Oscar Jorda, a professor there as well as a visiting scholar at the San Francisco Fed — used leading economic indicators to try to predict the possibility of a renewed economic downturn.

The experiment yielded vastly different results, depending on which indicators were used. But overall, they said, the numbers "indicate that the macroeconomic outlook is likely to deteriorate progressively starting sometime next summer."

"Of course, economic policy can strongly influence the outcome," the researchers said. "The policies that are adopted today could play a decisive role in shaping the pace of growth."

Meanwhile, the Federal Reserve may send a clear signal it is prepared to print more money to support the faltering economic recovery if necessary.

The central bank is widely expected to renew its vow to keep rates near zero for "an extended period" and markets will watch closely for signs officials are growing more concerned the recovery is at risk or that there is danger of falling into a damaging vicious cycle of falling prices and slowing growth.

Evidence the already sluggish recovery has lost momentum has shifted discussion at the U.S. central bank from exit strategies to whether the economy needs more backing, which would most likely come in the form of buying more longer-term assets.

A disappointingly weak report on employment in July, when the private sector added a meager 71,000 new jobs, adds weight to arguments in favor of more stimulus.

Fed Chairman Ben Bernanke told Congress in July the central bank is "ready and will act" if the recovery did not continue to move forward.

© 2017 Thomson/Reuters. All rights reserved.

1Like our page
2Share
Headline
There is a significant chance the U.S. economy will slip back into recession in the next two years although a reversal is unlikely in the next few months, researchers at the San Francisco Federal Reserve Bank said on Monday. The probability of another recession during...
san,francisco,Fed,Chance,Recession
428
2010-14-09
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved