The U.S. is going to experience “zero” growth in 2023 and teeter on the verge of recession, economists say, as a result of rising interest rates orchestrated by the Federal Reserve to subdue high inflation. Top economists at the American Bankers Association say the resulting slowdown is likely to trigger a sharp increase in layoffs and push the unemployment rate close to 5% within the next two years. A rapid rise in wages over the past year is also expected to peter out.
The deterioration in the economy and weakening labor market, however, is also seen helping the Fed bring down inflation more quickly. The ABA forecasts inflation to slow to 2.8% in 2023 and 2.2% in 2024 from an average 6.4% rate in the prior year, based on the consumer price index. That would put the rate of inflation close to the Fed’s 2% goal a bit faster than the central bank has forecast. “The wheels are in motion for a moderation in inflation to play out,” said Simona Mocuta, chairwoman of the ABA economic advisory panel and chief economist at State Street Global Advisors. Under that scenario, the Fed would actually start …