Washington

Fitch Ratings on Tuesday presented another gloomy report by suggesting that the US economy may witness a 1990-style mild recession, starting spring next year.

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A combination of stubborn inflation and the US Central Bank's three consecutive interest rate hikes will lead to such a recession, explained the credit rating agency. 

The report added that the US GDP may grow at a snail's pace of 0.5 per cent which was an entire percentage point down from the June prediction. 

However, in an attempt to cushion its rather gloomy analysis, the agency said that the US economy will be entering this phase from a 'position of strength' as the consumers are not saddled with debt, like 'The Great Recession of 2008'. 

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“US household finances are much stronger now than in 2008, the banking system is healthier and there is little evidence of overbuilding in the housing market,” it said. 

“Fitch Ratings expects a very strong consumer balance sheet and the strongest labour market in decades to cushion the impact of a likely recession."

WATCH | Fitch: Inflation and fed hikes to drive US economy into recession

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The forecast made by the agency may be in line with the recent performance of the US economy. For two consecutive quarters, the US economy has shrunk, meaning, it has technically entered a recession.

While the US remains down, the rest of the world is not faring much better either. As reported by WION, last month, the same agency lowered the GDP forecasts for all the major economies citing high inflation, the European gas crisis, and a sharp acceleration in the pace of global monetary policy tightening. 

Read more: Fitch lowers world's growth forecast, slashes India's GDP rise to 7% for 2022-23

The world is now expected to grow at 2.4 per cent for the current year from the earlier projection of 2.9 per cent, according to the agency. 

(With inputs from agencies)

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