The FOMC (Federal Open Market Committee) is responsible for setting monetary policy in the United States. The minutes of their meetings provide insight into their economic outlook and decision-making process. The minutes from their last meeting revealed they expect a mild recession, and surprisingly enough, some may argue that’s actually the best case scenario.
Before we continue - a quick disclaimer: any recession, even a mild one, has negative consequences for those who lose their jobs or experience financial hardship. So while a mild one may be preferable to a more severe and wild one, recession is still something that we as consumers sometimes aim to avoid, if possible.
So how can a mild recession be perceived as something positive?
A mild recession can be seen as the best-case scenario because it means it is under control and expected to be relatively short-lived.
It’s an economic downturn that could eventually help to correct imbalances in the economy without causing too much harm to businesses and households.
Recessions are a normal part of the business cycle, and a mild recession can be seen as a healthy adjustment to previous excesses in the economy.
When recession occurs, the Federal Reserve can use its monetary policy tools to stimulate the economy by lowering interest rates and increasing the money supply. In addition, it can cultivate innovative new products that support the public’s financial needs to boost the economy. This can help to support businesses and households, and encourage investment and spending, which can help to bring the economy out of recession more quickly.
Now all eyes are set on the May meeting, while we wait to see which recession projections will manifest at the end - will it be mild, or will it go wild?