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Fed Rate Cut: Is It Too Late? | Macro Alf

Bankless

NOTE

Balancing Probabilities with Fiscal Resilience

There is a significant perceived probability of a recession occurring within the next 12 months, estimated at 50%. However, the potential impact of such a recession is anticipated to be mitigated by two key factors. First, current fiscal policies indicate a readiness from politicians to inject more funds into the economy swiftly in response to downturns, contrasting with slower reactions in past economic crises. This proactive fiscal approach may stabilize the economy and prevent a severe recession. Second, the private sector is currently operating with lower levels of leverage and is subject to more stringent regulations than in previous downturns, such as in 2008. These conditions are expected to reduce the overall severity of a potential recession, suggesting that while risks exist, the outcomes may not be as dire as in the past.

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