Economy and Markets Moderate After Red-Hot 2021, Recession Risks Rise But Outlook Still Positive
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Economic growth is decelerating from a very hot pace to still solid levels. Inflation is cooling from 40-year highs but prices are still rising.
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The labor market remains robust with low unemployment, but job growth and wage growth are moderating. Consumer finances are strong.
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The Federal Reserve is keeping monetary policy tight for now to ensure inflation moves sustainably to 2% before easing. Rate cuts could come later this year.
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Recessions describe the direction of the economy, not the level. The next recession may not be that bad given strong consumer and business finances.
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Stocks have priced in much of the tightening. While recession risks are elevated, the long-term outlook remains positive as downturns are part of the deal.