According to a CNBC report, the European investor sees “mild recession” in the United States in 2020. It is important to see the prediction in the context in which it is made. While the US Fed kept its benchmark rates unchanged last week, Jerome Powell, the Chair, hinted at the possibility of rate cuts. A cut in interest rate can have a chain effect with the ultimate motive of boosting growth. However, such measures are usually taken in an event of worsening national and/ or global economic conditions.
Amid stretching US-China trade war and with US general elections around the corner, any development or news related to American economy holds unique importance for all stakeholders. Observers are watching the United States economy keenly and very closely, and they are noting even the slightest movements and changes. Zurich Insurance’s head of macroeconomics and chief market strategies Guy Miller made a similar prediction about the future of the US economy recently.
Miller cited the above-mentioned event as a primary reason for suspecting mild recession in the coming year. He believes that earnings and profit margins for most US businesses will also be impacted as a result of recession. Even though the rates remain unchanged for now, Miller went on to predict interest rate cut towards the end of the year.
However, it may be seen as a matter of perspective rather than professional calculations as other analysts seem to disagree with Miller’s viewpoint. Bob Baur works as Chief Global Economist for Principal Global Investors and, while he expects at least two interest rate cuts; once in July and once in September, he does not see the worsening condition of US economy as a reason behind these cuts.
Some analysts believe that any cut in interest rate is likely for the purpose of aligning rates with prevailing inflation trends along with acting as a catalyst for economic growth in the ongoing economic cycle. In fact, these analysts believe US economy to moving forward in a positive direction in the near future.
It is true that only time will ascertain how the American economy behaves in the upcoming year. However, it is safe to say that any movement will be directly linked with a number of factors and events and how the US administration decides to respond to these events. Various plans are being made at international political and economic stages and end-result of these plays may have a direct impact, either positive or negative, on the American economy.