No and that is unfortunately by design. The federal reserve targets 2% inflation as “the ideal.” Prices dropping across the board ie negative inflation is called deflation. Deflation can lead to a deflationary spiral where prices drop reducing busines income resulting in layoffs which causes people to spend less causing a drop in income for businesses… The federal reserve attempts to control the money supply (and inflation along with it) through setting interest rates as the lender of last resort for banks. These rates indirectly control how much money is dumped into the banking system and eventually broader economy. The lower the rates the more money enters the system, the higher the rates the less money enters the system. (simplification but good enough for ELI5) However, because the federal reserve can only reduce rates to 0% there is a limit on how much money can be injected into the economy through cheaper lending (government spending is a potential work around for this limitation) so it is seen as being much more of a hazard than runaway inflation as in the latter case, rates can be raised to an arbitrary degree. ie rates are raised until inflation drops.
While reduced inflation is good on its own, there are several indicators that the economy is likely to enter a recession within ~1 year or so. eg. short to medium term givernment bond rates, the general trend of recessions following substantial monetary tightening (higher rates) by the federal reserve etc.
government spending is a potential work around for this limitation
Not a finance guru but I believe there are also “market operations” where the central bank prints money to buy up assets thereby injecting money into the economy - and I guess when they want to shrink the money supply they just sell off those assets.
The indicators are all there for predicting a recession. The only question is if policy changes before then. There’s always a variance between prediction and reality.
The economy did enter a recession, but the administration refused to call it one as there were not broad layoffs and unemployment remained low. Artifacts of COVID reducing the US workforce by 2.6% (Deaths + people deciding it was a great time to retire)
No and that is unfortunately by design. The federal reserve targets 2% inflation as “the ideal.” Prices dropping across the board ie negative inflation is called deflation. Deflation can lead to a deflationary spiral where prices drop reducing busines income resulting in layoffs which causes people to spend less causing a drop in income for businesses… The federal reserve attempts to control the money supply (and inflation along with it) through setting interest rates as the lender of last resort for banks. These rates indirectly control how much money is dumped into the banking system and eventually broader economy. The lower the rates the more money enters the system, the higher the rates the less money enters the system. (simplification but good enough for ELI5) However, because the federal reserve can only reduce rates to 0% there is a limit on how much money can be injected into the economy through cheaper lending (government spending is a potential work around for this limitation) so it is seen as being much more of a hazard than runaway inflation as in the latter case, rates can be raised to an arbitrary degree. ie rates are raised until inflation drops.
While reduced inflation is good on its own, there are several indicators that the economy is likely to enter a recession within ~1 year or so. eg. short to medium term givernment bond rates, the general trend of recessions following substantial monetary tightening (higher rates) by the federal reserve etc.
Not a finance guru but I believe there are also “market operations” where the central bank prints money to buy up assets thereby injecting money into the economy - and I guess when they want to shrink the money supply they just sell off those assets.
quantitive easing: https://www.investopedia.com/articles/economics/10/understanding-the-fed-balance-sheet.asp
The indicators are all there for predicting a recession. The only question is if policy changes before then. There’s always a variance between prediction and reality.
The economy did enter a recession, but the administration refused to call it one as there were not broad layoffs and unemployment remained low. Artifacts of COVID reducing the US workforce by 2.6% (Deaths + people deciding it was a great time to retire)