Economy Defies Dire Forecasts, Showing Unexpected Resilience in Early 2023
• The Fed started 2023 with dire economic predictions that didn't come true - growth was 5 times faster than expected and unemployment barely rose • Supply chain improvements, rising productivity, higher labor participation, and resilient consumer spending all helped the economy do better than forecast • The Fed raised rates to cool demand and reduce inflation, but markets overshot and drove borrowing costs even higher • Fears of a broad financial crisis due to bank failures did not materialize as expected • The Fed believes some positive trends like improving supplies have room to continue, keeping inflation in check