US to enter a recession in 2023 – Danske Bank

The outlook for the US economy appears challenging. Economists at Danske Bank expect growth to continue moderating.

Recession looming in 2023

“The US economy continues to face rapid inflation stemming from aggregate demand remaining too high. The Fed will continue to tighten financial conditions and push the US economy towards a recession starting in Q2 2023. We expect US GDP to contract by 0.2% in 2023 followed by a gradual recovery of 0.5% in 2024.” 

“While macro momentum has clearly cooled over the recent months, the US economy still remains on a path of modest growth towards the winter, supported by strong exports and resilient private consumption.”

“Risks remain tilted towards inflation pressures turning out more persistent than expected, and thus we expect the Fed to take a cautious approach in eventually easing its monetary policy stance. We expect the Fed Funds rate to rise to 5.00-5.25% in February 2023, and look for four 25 bps cuts only in 2024.”