Approximately half of the economists associated with a leading business economics organization said in a new survey that they do not have much confidence in the Federal Reserve’s ability to bring down inflation without triggering a recession.
The poll of 198 National Association of Business Economics (NABE) members published on Monday showed the nation’s leading economists have a mostly dim outlook for the economy heading into 2023.
While 52 percent of the economists surveyed are not very confident in the Federal Reserve’s capabilities of bringing inflation down from 8.5 percent to 2 percent without triggering a recession — what is known as a soft landing — about 21 percent said they are not at all confident the Fed could avoid a recession.
Low confidence in the Fed seems to be widespread and dominant, according to the new poll. Only 3 percent of the economists in the NABE survey are very confident the nation’s central bank can bring inflation down, while 24 percent are somewhat confident or confident in the Federal Reserve.
NABE Policy Survey Chair Juhi Dhawan said the key takeaway from the survey is that economists are “concerned about inflation and recession.”
“Overall, panelists are not confident that the Federal Reserve will be able to bring inflation down
to its two percent goal within the next two years without triggering a recession,” Dhawan said in a statement.
The U.S. has hit a 40-year high inflation rate this year, and Americans are struggling to pay for food and gas.
The Federal Reserve in June hiked interest rates to 0.75 percent in an effort to achieve a soft landing, but economists are increasingly looking at other ways to tamp down inflation, such as implementing a carbon tax to take demand out of the economy.
Meanwhile, the nation’s economy has shrunk for the past two consecutive quarters, usually a sign of a recession, although the Biden administration has pointed to healthy consumer spending and job growth as counterpoints that the country is not yet in recession territory.
The NABE survey shows 19 percent of the business economists polled agree the U.S. is already in a recession, while 47 percent say the country will enter a recession by the end of 2022 or by the first quarter of 2023.
Still, economists are not entirely grim on the economic outlook. Most of the respondents supported the Inflation Reduction Act, which was signed into law this month to reduce the U.S. deficit, expand healthcare benefits and tackle climate change.
About 76 percent back the $300 billion deficit reduction goal included in the act, while 69 percent support a 15 percent minimum corporate tax rate.
But the economists are split on more general fiscal policy from the federal government, with 51 percent saying there is too much economic stimulation on fiscal policy and 44 percent saying it’s about right.
NABE President David Altig said panelists are generally split on where the nation’s economy is headed and what needs to be done to rescue it.
“Survey results reflect many split opinions among the panelists,” Altig said. “This by itself suggests that there is less clarity than usual about the outlook.”
The NABE survey was conducted Aug. 1-9.