Federal Reserve: Banking Crisis Pushes Economy Towards Recession in 2023

The minutes of the Federal Reserve meeting showed that the repercussions of the US banking crisis are likely to push the economy towards recession during the current year.

The minutes of last March's meeting included discussions among the Fed's members about the potential repercussions of the collapse of the Silicon Valley Bank and the subsequent turmoil in the financial sector that began in early March.

The minutes read: “Given their assessment of the likely economic effects of recent developments in the banking sector, the expectations of Fed officials at last month's meeting included a mild recession beginning later this year, with a recovery over the next two years.”

Projections that followed the meeting indicated that Federal Reserve officials expect US GDP to grow by only 0.4% for 2023.

The previous Fed meeting resulted in an interest rate increase of 0.25 basis points, which is the 9th consecutive increase to reach the range between 4.75% and 5%, the highest level since late 2007.

The minutes of the meeting stated: "Reflecting the effects of tightening on the labor market and production, core inflation was expected to slow sharply next year."

"Even with the actions that have been taken, members have recognized that there is a great deal of uncertainty about how these conditions will evolve," it added.