MBA Updates Economic Forecast

The Mortgage Bankers Association released an updated economic forecast.

Click here for MBA’s latest economic forecast.

MBA now forecasts the U.S. economy will slow to a growth rate of 0.6 percent in 2022. This is a downward revision from last month’s forecasted growth rate of 1.6 percent. Higher interest rates resulting from the Fed’s efforts to combat inflation, as well as the persistently high rate of inflation, are causing stresses for households and businesses. The tighter financial conditions will lead to weaker growth.

“While a recession is not in our baseline forecast, it is a coin flip at this point, as we estimate a roughly 50 percent chance that the U.S. could enter a recession over the next 12 months, with the most likely timing being in the first half of 2023,” the forecast said.

MBA also expects the Federal Reserve will continue to tighten, with the Federal funds rate reaching a range of 3.25 to 3.5 percent at the end of 2022, and a range of 3.75 to 4 percent at the end of 2023.

“The unemployment rate has likely reached its low point at 3.6 percent and may start to inch up by the end of the year (and through next year), breaching the 4-percent mark by the second half of 2023,” MBA said. “There are already signs of a slowdown in hiring, including fewer job openings and an increase in initial unemployment claims.”

While inflation remains stubbornly high, the Fed’s rate hikes and weakening demand will push the inflation rate down over the next year, MBA said. Lower demand for commodities will cool headline inflation and ease supply-chain backlogs. The association expects inflation to end the year at around 6 percent before declining to a 2 to 2.5 percent range in 2023 and 2024.