Federal Reserve expects recession later this year after banking crisis: Minutes

The Federal Reserve staff expect a recession later this year following the banking crisis, minutes from the March Federal Open Market Committee (FOMC) policy meeting show.

Here is the key part of the minutes (emphasis ours):

“For some time, the forecast for the U.S. economy prepared by the staff had featured subdued real GDP growth for this year and some softening in the labor market. Given their assessment of the potential economic effects of the recent banking-sector developments, the staff’s projection at the time of the March meeting included a mild recession starting later this year, with a recovery over the subsequent two years. Real GDP growth in 2024 was projected to remain below the staff’s estimate of potential output growth, and then GDP growth in 2025 was expected to be above that of potential. Resource utilization in both product and labor markets was forecast to be much less tight than in the January projection. The level of real output was projected to move below the staff’s estimate of potential output in early 2024, more than a year sooner than in the previous projection. Likewise, the unemployment rate was projected to rise above the staff’s estimate of its natural rate early next year.“

This is obviously bullish for the stock market since it all but confirms that the Fed will cut interest rates heading into 2024.

Full minutes meeting can be viewed here.