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After a year of growth, the U.S. economy is about to crash

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The U.S. economy is about to slam into a wall of near-zero interest rates. After a massive year of growth, the economy will soon enter a headwind period. Gross domestic product (GDP) growth of around 2% is now a given; the question is whether that growth accompanies wide-scale inflation. But with interest rates set to stay at near-zero levels for an extended period, the Fed will have to delay any attempts to raise interest rates.

Prompted by a massive inventory rebuild, the U.S. economy in 2021 grew at its fastest pace since 1984.

However, experts don’t expect a repeat performance in 2022. The year starts with minor growth signs. The late-year spread of omicron connected with fiscal stimulus has economists across Wall Street knocking down their predictions for gross domestic product.

The Federal Reserve has shifted from the most specific policy in its history to hawkish inflation-fighters. As a result, the picture has suddenly changed substantially. The Atlanta Fed’s GDP is currently tracking a first-quarter GDP gain of just 0.2%.

Chief Economist for the Americas at Natixis and former Chief Economist for the National Economic Council, Joseph LaVorgna, talked about the case. He said that the economy is downshifting. He explained that it is not a recession until the Fed tries to get too aggressive.

GDP surged at an impressive 6.8% in the fourth quarter of 2021. It closed out a year in the U.S. increased 5.8% annually. That came after a pandemic-induced 3.5% decline in 2020. This year saw the steepest but most temporary recession in U.S. history. However, the future route appears less certain.

Goldman Sachs cut its first-quarter GDP outlook to 0.4%, down from 2.1%. The bank also cut its full-year view to 3.3%, well below the current 3.7% consensus.

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