There will be no recession in the immediate future of the American economy, because growth will continue despite the banking crisis which now seems to be behind us. Treasury Secretary Janet Yellen instills optimism in the prospects of the world‘s leading economy and tries to dispel the fears of those who expect long and heavy consequences from the failures of Silicon Valley bank and Signature Bank. “I continue to expect the US economy to grow, the job market to remain robust, and inflation to come down,” Yellen said in an interview.
To many observers it sounded like a response to the prediction made a few days ago by the CEO of JPMorgan, Jamie Dimon, according to which the banking crisis “is not over and, even if it is behind us, it will have repercussions for years”. But Yellen also reassures on that front: “Our banking system is solid and resilient, with strong capital and liquidity”, and in any case the institutions “are prepared to use all the tools necessary for institutions of any size”, he reiterated.
The picture, however, is not yet clear enough to claim victory. If it is true that calm has returned to the markets in recent weeks and investors have begun to trust the banking sector again, the incoming economic data does not give too many certainties. The labor market in the US in March slowed down for the second consecutive month but not enough, according to analysts, to convince the Federal Reserve to stop the path of rate hikes as early as the next meeting in May.
After the 25 basis point increase decided in March, which brought the cost of money to its highest level since 2007, the Fed could therefore continue along the same path, tightening credit conditions even further for households and businesses. However, the squeeze, combined with the difficulties of the banks which will limit loans to protect themselves, could risk compromising the delicate balance that keeps growth alive during the rate hike phase.
The recession is therefore not a completely unfounded scenario because the climate remains extremely uncertain: according to a study by Unimpresa, for example, if the financial crisis in the USA continued, it would turn into a three-year recession for both the Eurozone and the the United States, with the latter paying the heaviest bill (-0.6% against -0.3% in the euro area).