US economic growth forecast lowered to 1.6% for this year: S&P

ANKARA

The US economy's growth forecast for 2023 is lowered to 1.6%, from 2%, amid the Federal Reserve's monetary tightening, higher unemployment risks and recession fears, according to S&P Global Ratings on Monday.

"The Fed will keep monetary policy tight until inflation decelerates and nears its target in second-quarter 2024," the global rating agency said in a report.

The agency said it expects the federal funds rate to reach the range of 3.5%-3.75% by the middle of next year, and warned about a recession in the world's biggest economy, noting "chances of a contraction are rising."

"We assess recession risk at 40%, reflecting a larger spike in prices with even more aggressive Fed policy heading into 2023," it said. "As inflation expectations become more entrenched, extreme price pressures will likely last well into 2023."

The rating agency said supply chain disruptions, Russia's war on Ukraine and a slowdown in China are all hurdles for the American economy.

It also said the unemployment rate in the US, which stood at 3.6% in May, is expected to exceed 4.3% by the end of 2023, and then climb over 5% by the end of 2025, as economic pressures deteriorate and the Fed raises rates.

The S&P kept its growth estimate for the American economy unchanged at 2.4% for this year.