Although the economy appears to be finishing 2022 on a strong note, the likelihood that we’ll experience a minor recession in 2023 remains unchanged. Some of the late 2022 statistics indicate a considerable slowdown. Even while there is still uncertainty, an increasing number of indicators, such as an inverted yield curve, a decline in the Conference Board’s Leading Economic Index, a slowdown in consumer spending, and a downturn in manufacturing activity, continue to point to a contraction of the economy in 2023.
The Consumer Price Index saw a decrease in inflation for the second consecutive month in late 2022, which was undoubtedly good news. However, the Federal Reserve is expected to continue keeping a close eye on measurements of wage growth, which have a history of being stickier. This will help it decide just how long it should keep its restrictive stance.
Given that a recession is expected to begin in the first quarter of 2023, the Federal Reserve may lower the federal funds rate in the middle to end of the year. During the whole time frame of the forecast, the opinions and actions of the Federal Reserve are very important to the outlook for the economy.
For many people, buying a home is still out of reach due to historically high interest rates and the fact that, while falling and, in some cases, even declining, housing prices are still high by pre-pandemic standards. Of course, most people who currently have mortgages find it impractical to refinance, which is another factor that will likely limit mortgage origination. If we experience a recession, each of these elements will be in play. To read more on this, click here.