Core inflation remains considerably higher than the Federal Reserve’s target. “To tame it, the Federal Reserve will need to be resolute, even at the risk of possible recession,” said Doug Duncan, Fannie Mae Senior Vice President, and Chief Economist.

In light of the Fed’s expected continuing tightening of monetary policy and global economic weakness, expect further slowing in housing activity, sluggish consumer spending, and business investment growth. Expect a moderate recession in 2023 and a weakening of the labor market.