https://www.fa-mag.com/news/recession-odds-are-becoming-unsettlingly-high-81595.html
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Recession Odds Are Becoming Unsettlingly High
March 4, 2025 • Mohamed A. El-Erian
The notion of a US recession seemed remote just a few months ago, a mere
blip on the radar of economic possibilities. More recently, however,
that picture has started to change. A downturn, while still a risk
scenario, is no longer unthinkable. A confluence of factors, from policy uncertainties to fragile financial markets, is casting a shadow over the world’s largest economy.
Several key financial indicators are already flashing yellow. The yield
on 10-year Treasury bonds has fallen about 70 basis points in recent
weeks, while oil prices have slipped below $70 a barrel. These moves
coincide with a string of disappointing economic data releases,
reflecting growing apprehension about the immediate consequences of
President Donald Trump’s trade policies and public sector reforms.
Indeed, judging from recent surveys, policy uncertainties have already
dampened business and household confidence, clouding the economic
outlook. This spreading weakness is manifesting itself in three distinct stages.
First, lower-income households have been struggling, burdened by
dwindling savings, maxed-out credit cards and mounting debt. Second, the corporate sector is now adopting more of a wait-and-see approach, faced
with a barrage of policy pronouncements and an increasingly
unpredictable environment. Third, the threat of a tit-for-tat tariff war
has become much more of a reality this week, with the potential to
disrupt global supply chains and stifle economic growth.
Adding to the unease, inflation, which had shown signs of abating, is
proving more stubborn than anticipated. This whiff of stagflation — that troublesome combination of stagnant growth and rapidly rising prices —
raises the specter of another policy misstep by the Federal Reserve.
..
Mohamed A. El-Erian is a Bloomberg Opinion columnist. A former chief
executive officer of Pimco, he is president of Queens’ College,
Cambridge; chief economic adviser at Allianz SE; and chair of Gramercy
Fund Management. He is author of “The Only Game in Town.” ==========================================
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