Economists Cut Recession Odds as Inflation Forecasts Rise

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A fresh survey of U.S. economists has revised downward the probability of a near-term recession while simultaneously lifting forecasts for inflation, according to reporting by BeInCrypto citing a Wall Street Journal poll. The twin shift has major implications for monetary policy and risk assets, including cryptocurrencies, which have long wagered on the Federal Reserve pivoting to lower borrowing costs.

The findings reflect a nuanced economic picture: recession fears have eased as the labor market and consumer spending have held up better than some feared. However, inflation expectations have climbed, suggesting price pressures remain sticky. That combination leaves the Fed with little flexibility to cut rates aggressively—a scenario that cuts against the narrative many risk-asset traders had banked on for a market recovery in the second half of the year.

The survey's dual signal

Economists in the poll slashed their recession probability estimate to 25 percent, down from prior expectations, per BeInCrypto's report. At the same time, they raised their inflation forecasts, signaling persistent upward pressure on prices. This paradoxical outcome—lower recession odds paired with elevated inflation—essentially traps the Fed between two policy constraints. Cutting rates too aggressively risks re-igniting inflation; holding rates high risks slowing growth further.

Implications for rate expectations

The survey data suggests the Fed will face mounting pressure to maintain restrictive monetary conditions for longer than markets had anticipated. A prolonged high-rate environment removes a key catalyst that crypto markets and other risk assets had relied upon for recovery. Many investors had positioned for a soft landing—modest economic slowdown without recession—followed by Fed rate cuts. The new survey data makes that scenario less bullish for speculative assets.

BeInCrypto notes that higher-for-longer interest rates directly affect the valuation of risk assets like cryptocurrencies, which benefit from lower borrowing costs and risk-on sentiment. When the Fed signals no imminent rate relief, demand for yield-generating alternatives and speculative bets typically softens.

What comes next

The tension between moderating recession risk and sticky inflation will likely dominate Federal Reserve communications and economic data releases in coming months. How Fed officials interpret these competing signals will shape both traditional markets and crypto sentiment. Markets will watch closely for any shift in the Fed's inflation outlook or labor market assessment that might finally justify looser policy.

For the full breakdown and additional analysis, see BeInCrypto's original report.

*Source: [BeInCrypto](https://beincrypto.com/recession-risk-inflation-fed-bitcoin/). Summary by Quantority.*