Fannie Mae: Inflation, Interest Rates Mean Slower GDP Growth
Persistent inflation, rising interest rates and a slowdown of global economic growth are the primary contributing factors to updated expectations that full-year 2022 real GDP will grow at the reduced rate of 1.3%, 0.8 percentage points less than previously predicted, according to the May 2022 commentary from the Fannie Mae Economic and Strategic Research (ESR) Group.
The ESR Group’s latest forecast sees second-quarter 2022 growth rebounding to 1.6% following last month’s news that the economy contracted by 1.4% percent in Q1. The Fed’s efforts to curtail inflation by tightening monetary policy are unlikely to result in a so-called “soft landing,” according to the group.
“Financial conditions have tightened significantly, and the economy is slowing faster than previously expected as markets adjust to the Federal Reserve’s tightening guidance,” said Doug Duncan, Fannie Mae chief economist. He added that geopolitical risks are on the rise as Russia’s war on Ukraine continues.
- ◦Economy
