Wall Street bets are growing that the U.S. economy tumbles into a recession next year as the Federal Reserve raises interest rates at the fastest pace in two decades in order to cool scorching-hot inflation.
Bank of America Global Research strategists have ratcheted up the odds of an economic downturn to 40% in 2023, with gross domestic product – the broadest measure of goods and services produced in a nation – slowing to almost zero by the second half of next year.
"Our worst fears around the Fed have been confirmed: They fell way behind the curve and are now playing a dangerous game of catch up," analysts led by Ethan Harris wrote. "We look for GDP growth to slow to almost zero, inflation to settle at around 3% and the Fed to hike rates above 4%."
People shop at a grocery store on May 12, 2022, in New York City. Prices of clothing, food, gas and cars are just a few of the items that are hitting Americans' pocketbooks despite historically low unemployment.