Could there be a recession in the coming days?

 Following the close of Thursday's North American session, US forecasts, as measured by the 10-year breakeven inflation rate, had fallen for the second day in a row, according to data from the St. Louis Federal Reserve (FRED). However, the inflation rate has just reduced to 2.58 percent.

Given the recent drop in inflation predictions, the new Fedspeak highlights concerns about excessive inflationary pressures in the world's largest economy. Minneapolis Federal Reserve President Neel Kashkari, US Treasury Secretary Janet Yellen, and Cleveland Federal Reserve Bank President Loretta Mester were among those in attendance.

Treasury Secretary Janet Yellen said Sunday, in an interview that the recession that many Americans anticipate is looming is not "at all imminent."

“I expect the economy to slow,” Yellen said in an interview. “It’s been growing at a very rapid rate, as the economy, as the labor market, has recovered and we have reached full employment. It’s natural now that we expect a transition to steady and stable growth, but I don’t think a recession is at all inevitable.”

Despite Yellen's optimism about averting recession, the world economy is vulnerable in the next months due to the ongoing conflict in Ukraine, rising inflation, and the Covid-19 outbreak. Yellen stated, "Clearly, inflation is unacceptably high."

Notwithstanding this, she does not anticipate that a decline in consumer spending could lead to a recession. Yellen said that the labor market in the United States is the best it has been since World War II, and that inflation will moderate "in the months ahead."

As inflation continues rising and the Federal Reserve takes strong efforts to combat it, speculation of a recession has increased this year. The Federal Reserve raised interest rates by 75 basis points on Wednesday, the highest increase since 1994. Fed Chair Jerome Powell also stated that the Federal Open Market Committee intends to keep strengthening monetary policy in to keep inflation under control.

Simultaneously, many people remain convinced that a combination of consumer spending resiliency and job growth will pull the US out of a possible recession.

According to celebrity investor Kevin O'Leary, the US economy is considerably bigger than most people believe, and there is "no evidence" of an oncoming downturn or recession. He stated that he has investments in a broad array of industries, including commercial kitchens, wireless charging, gym equipment, and greeting cards. He also says he hasn't seen "any indication" of a downturn.

″I’m not saying we won’t get one, but everybody that’s saying it’s coming around the corner next week is just wrong,” O’Leary told CNBC’s “Squawk Box Asia” on Thursday. “I see their tear sheets each week. We don’t see slowdown yet,” he said, referring to a document summarizing key information about a company. “I think I’ll be one of the first to see it. I’m sort of a canary in the coal mine in that respect.”

As a result, the market's skepticism of inflation predictions appears to be weighing on appetite for risk, keeping mood heavy ahead of Fed Chair Jerome Powell's important testimony.

It's important to note that Fed Chairman Powell would have a difficult time defending the current 0.75 percent rate rise without at least mentioning the economic difficulties.

The US market will be restricted on Monday due to the Juneteenth holiday, but growth uncertainties and discussion of aggressive Fed predictions might keep the risk-off sentiment alive.

 

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