In a Monday report to clients, economists led by Seth Carpenter said “it is far too soon to declare victory” given higher Federal Reserve interest rates take time to bite.
But the US labor market has proved stronger than anticipated and “inflation has turned down decisively,” they said.
“We continue to think that even if our baseline view is wrong, any recession that might come this year would likely be shallow,” the economists wrote. “A far cry from the 2008 recession to be sure, and probably mild even relative to the 1991 and 2001 recessions.”
Among the reasons for that optimism: Businesses are loathe to lay off workers after discovering how hard it is to hire and corporate balance sheets are in strong shape so a credit crunch can be avoided.
While a global slowdown is also underway, “it’s not looking like a disaster,” the Morgan Stanley economists said.
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