Citi economist Sheets sees ‘significant’ chance of recession

Citigroup Inc.’s global chief economist said odds of a recession are “significant” over the next 18 months, with about a one-in-three chance of a global downturn and one-in-four for the US.

“The geopolitical situation, the energy situation is very severe,” Nathan Sheets said on Bloomberg Television’s “Balance of Power” with David Westin. While the US may be insulated somewhat, former Federal Reserve chair Alan Greenspan “once said, the United States cannot long remain an island of prosperity and stability in a world that’s struggling,” Sheets said.

The global situation, in tandem with the Federal Reserve’s plan to raise interest rates potentially “very rapidly,” makes the chances of a recession “significant,” said Sheets, a former US Treasury and Fed official.

The Fed earlier this month raised its benchmark interest rate by a quarter percentage point, the first hike since 2018. Fed Chair Jerome Powell and his colleagues projected a series of increases this year to fight highest US inflation in four decades, which may be exacerbated by Russia’s invasion of Ukraine.

President Joe Biden on Thursday announced that the US will release roughly a million barrels of oil a day from its reserves for six months beginning in May to address rising gasoline prices and supply shortages following Russia’s attack.