The U.S. could face a recession by next year or in 2020 as a growing threat of inflation forces the Federal Reserve to raise interest rates more quickly than anticipated, Colorado Springs economist Tatiana Bailey said Tuesday.
But an economic downturn in the next few years is no sure thing, and economic growth should remain solid in 2018 with nearly every region of the world growing, tax cuts fueling business and consumer spending and consumer confidence near record levels, said Bailey, who is director of the University of Colorado at Colorado Springs Economic Forum. She will discuss her updated forecast for the local economy at 5:30 p.m. Thursday in the Kettle Creek Room of the Roaring Fork Dining Hall, near Austin Bluffs Parkway and Stanton Road.
“It is not inconceivable that we could have a recession by the end of 2018. I am watching the key indicators closely. We are not seeing sunny skies any more, but I’m not seeing a storm either,” Bailey said. “The rate of growth in Colorado Springs is slowing. I will wait a couple of months before revising my forecasts (downward). We will have a better sense by mid-year whether growth is just flattening out, or if storm clouds are starting to appear on the horizon.”
Bailey said she is concerned that the early signs of inflation that triggered a stock market correction earlier this month could push interest rates higher, which would slow economic growth. However, inflation remains barely above the Federal Reserve’s target annual rate of 2 percent and interest rates still remain near historic lows, she said. Any recession likely will be mild, she said, and Colorado Springs is better positioned to avoid the severe economic damage it suffered during the Great Recession because the local economy is more diversified now than it was a decade ago, she added.
The current economic expansion could soon eclipse a nearly 10-year period of growth during the 1990s, a record Bailey expects will be broken.
“I hope we can ride this wave a little longer, potentially until the end of the year,” she said. “But after a long period of stability, I am definitely seeing movement in key indicators. While those movements may be small, we are seeing them all happen at the same time and that is a concern.”