So the staff now has a noticeable slowdown in growth starting later this year in the forecast, but given the resilience of the economy recently, they are no longer forecasting a recession.

CHAIR POWELL, FOMC Meeting July 2023

Financial market participants through the second half of this year have been busy downgrading their expected probabilities for a recession in the U.S. Even the Fed staff forecast (which differs from the forecast of FOMC members) no longer assumes a recession, as Chair Powell noted in July. The continued strength in the stock market and the notable steepening of the yield curve also seem consistent with the view that the economy could manage to eke out a soft landing. However, in this Economics Weekly, we discuss the recession probability, with the view that since the Fed only started to raise interest rates in March last year, the U.S. is far from being out of the woods just yet, and it is much too soon to be complacent about growth.

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Richard de Chazal, CFA, is a London-based macroeconomist covering the U.S. economy and financial markets.