US economy facing 'modest' recession next year, Fannie Mae says

The U.S. economic outlook is dimming and a downturn could be on the horizon as the Federal Reserve moves to tame the hottest inflation in four decades, according to Fannie Mae economists.

The mortgage lender said in a new economic and housing forecast that the economyfaces a "modest recession" in 2023 as a result of the Fed's aggressive monetary policy tightening trajectory, fallout from the Russian war in Ukraine and the worst inflation in a generation.

"We continue to see multiple drivers of economic growth through 2022, but the need to rein in inflation, combined with other economic indicators, such as the recent inversion of the Treasury yield curve, led us to meaningfully downgrade our expectations for economic growth in 2023," Doug Duncan, Fannie Mae’s chief economist, said in a statement.

Still, Fannie Mae said it does not expect the recession to be worse than the one seen in 2008 in the wake of the financial crisis, largely because of the current state of the housing market, including a mortgage credit quality that is "far superior" and mortgage lenders that are better equipped than they were a decade ago. 

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