Accessible Version

Monetary Policy, Inflation Outlook, and Recession Probabilities, Accessible Data

Figure 1. Probability of Recession Implied by NTFS, the Policy Gap, and Inflation Slope
Date Nominal NTFS Policy Gap + Inflation Slope Unconditional probability of transitioning into a recession
1962 Q2 0.072460795 0.025930955 0.155339806
1962 Q3 0.099699895 0.019199218 0.155339806
1962 Q4 0.159556398 0.027213765 0.155339806
1963 Q1 0.103220276 0.033695362 0.155339806
1963 Q2 0.084028322 0.027351973 0.155339806
1963 Q3 0.164300023 0.069453043 0.155339806
1963 Q4 0.123684569 0.074500648 0.155339806
1964 Q1 0.070759999 0.080580821 0.155339806
1964 Q2 0.11694326 0.0335398 0.155339806
1964 Q3 0.154703065 0.051605003 0.155339806
1964 Q4 0.242210751 0.116489897 0.155339806
1965 Q1 0.315965442 0.135868596 0.155339806
1965 Q2 0.293124522 0.146269158 0.155339806
1965 Q3 0.290122455 0.098625349 0.155339806
1965 Q4 0.237609846 0.158220623 0.155339806
1966 Q1 0.239277332 0.215795993 0.155339806
1966 Q2 0.149048217 0.269164946 0.155339806
1966 Q3 0.450230427 0.219786224 0.155339806
1966 Q4 0.470729538 0.336183662 0.155339806
1967 Q1 0.226067247 0.141314034 0.155339806
1967 Q2 0.009219922 0.03218119 0.155339806
1967 Q3 0.038637283 0.08830402 0.155339806
1967 Q4 0.097508442 0.12926531 0.155339806
1968 Q1 0.111357504 0.218134841 0.155339806
1968 Q2 0.270467788 0.321826627 0.155339806
1968 Q3 0.292199275 0.387388462 0.155339806
1968 Q4 0.465846064 0.610279077 0.155339806
1969 Q1 0.356065354 0.538530321 0.155339806
1969 Q2 0.126490762 0.502073046 0.155339806
1969 Q3 0.055887859 0.624621408 0.155339806
1969 Q4 0.410335061 0.68277097 0.155339806
1970 Q1 0.061192098 0.455098236 0.155339806
1970 Q2 0.004831942 0.322475563 0.155339806
1970 Q3 0.010950811 0.094264689 0.155339806
1970 Q4 0.011255297 0.103954996 0.155339806
1971 Q1 0.015385631 0.00547533 0.155339806
1971 Q2 8.83E-04 0.023168223 0.155339806
1971 Q3 0.006828214 0.011763753 0.155339806
1971 Q4 0.001342015 0.006909833 0.155339806
1972 Q1 1.33E-05 0.001352776 0.155339806
1972 Q2 2.18E-04 0.001405792 0.155339806
1972 Q3 9.50E-04 0.007838721 0.155339806
1972 Q4 0.019510497 0.036889331 0.155339806
1973 Q1 0.225713301 0.329927814 0.155339806
1973 Q2 0.911307611 0.809750796 0.155339806
1973 Q3 0.76924651 0.963764622 0.155339806
1973 Q4 0.948086822 0.951735258 0.155339806
1974 Q1 0.926181944 0.967626528 0.155339806
1974 Q2 0.085938857 0.945281829 0.155339806
1974 Q3 8.69E-04 0.862570006 0.155339806
1974 Q4 0.33854637 0.948193074 0.155339806
1975 Q1 4.05E-04 0.124427223 0.155339806
1975 Q2 8.83E-04 0.016004958 0.155339806
1975 Q3 4.71E-04 0.078858177 0.155339806
1975 Q4 5.45E-05 0.016595357 0.155339806
1976 Q1 1.25E-05 0.004449618 0.155339806
1976 Q2 8.87E-05 0.008779668 0.155339806
1976 Q3 8.06E-04 0.020234165 0.155339806
1976 Q4 0.002186771 0.019958923 0.155339806
1977 Q1 6.14E-05 0.021112043 0.155339806
1977 Q2 0.003919181 0.049498663 0.155339806
1977 Q3 0.024374957 0.129920335 0.155339806
1977 Q4 0.010079955 0.155574474 0.155339806
1978 Q1 0.005426053 0.250762072 0.155339806
1978 Q2 0.004222737 0.300448816 0.155339806
1978 Q3 0.25732864 0.580968189 0.155339806
1978 Q4 0.506405187 0.966735053 0.155339806
1979 Q1 0.708025813 0.987677092 0.155339806
1979 Q2 0.740816968 0.976742885 0.155339806
1979 Q3 0.951260036 0.992631016 0.155339806
1979 Q4 0.999645591 0.999979409 0.155339806
1980 Q1 0.994892059 0.999999906 0.155339806
1980 Q2 0.004587539 0.675451995 0.155339806
1980 Q3 0.272196268 0.834524758 0.155339806
1980 Q4 0.999994741 0.999999588 0.155339806
1981 Q1 0.175749198 0.999854843 0.155339806
1981 Q2 0.845012361 0.999947182 0.155339806
1981 Q3 0.003495129 0.999863496 0.155339806
1981 Q4 4.27E-06 0.188197969 0.155339806
1982 Q1 0.112928976 0.641323873 0.155339806
1982 Q2 0.003262263 0.646328504 0.155339806
1982 Q3 3.38E-13 1.59E-04 0.155339806
1982 Q4 3.77E-05 0.006463385 0.155339806
1983 Q1 0.002244111 0.077386495 0.155339806
1983 Q2 6.78E-04 0.146085307 0.155339806
1983 Q3 2.47E-05 0.07223428 0.155339806
1983 Q4 2.02E-05 0.042027479 0.155339806
1984 Q1 5.41E-05 0.122005067 0.155339806
1984 Q2 8.32E-11 0.017214885 0.155339806
1984 Q3 9.29E-05 0.144721212 0.155339806
1984 Q4 2.26E-08 0.006831791 0.155339806
1985 Q1 7.09E-08 0.010343957 0.155339806
1985 Q2 6.31E-07 0.002595741 0.155339806
1985 Q3 1.35E-06 0.008008547 0.155339806
1985 Q4 0.007983818 0.044049986 0.155339806
1986 Q1 0.041421313 0.163475209 0.155339806
1986 Q2 0.003763522 0.146132612 0.155339806
1986 Q3 4.47E-04 0.059095816 0.155339806
1986 Q4 0.028291844 0.078606464 0.155339806
1987 Q1 0.01000346 0.070293985 0.155339806
1987 Q2 5.69E-05 0.006811379 0.155339806
1987 Q3 3.61E-06 0.010341552 0.155339806
1987 Q4 5.12E-06 2.63E-04 0.155339806
1988 Q1 8.40E-05 0.007172254 0.155339806
1988 Q2 8.79E-04 0.028957876 0.155339806
1988 Q3 0.01143954 0.114078229 0.155339806
1988 Q4 0.048398942 0.320282197 0.155339806
1989 Q1 0.134127359 0.547244527 0.155339806
1989 Q2 0.555824688 0.559952732 0.155339806
1989 Q3 0.24603767 0.660524685 0.155339806
1989 Q4 0.302112003 0.67173762 0.155339806
1990 Q1 0.04523099 0.536113193 0.155339806
1990 Q2 0.136860098 0.391374003 0.155339806
1990 Q3 0.02378571 0.325266857 0.155339806
1990 Q4 0.027988846 0.170566824 0.155339806
1991 Q1 4.26E-04 0.090252067 0.155339806
1991 Q2 8.00E-05 0.008292873 0.155339806
1991 Q3 0.003558185 0.009118947 0.155339806
1991 Q4 0.001257005 0.003928936 0.155339806
1992 Q1 1.64E-06 6.25E-04 0.155339806
1992 Q2 6.02E-05 1.05E-04 0.155339806
1992 Q3 1.75E-04 3.85E-04 0.155339806
1992 Q4 9.29E-06 1.95E-04 0.155339806
1993 Q1 6.82E-04 4.28E-04 0.155339806
1993 Q2 0.00188718 0.002031411 0.155339806
1993 Q3 0.002700038 0.002054485 0.155339806
1993 Q4 4.38E-04 0.003558953 0.155339806
1994 Q1 4.27E-06 9.31E-04 0.155339806
1994 Q2 1.12E-06 3.42E-04 0.155339806
1994 Q3 3.03E-06 9.52E-04 0.155339806
1994 Q4 1.48E-05 0.002382755 0.155339806
1995 Q1 0.006546377 0.028356715 0.155339806
1995 Q2 0.173505057 0.154208588 0.155339806
1995 Q3 0.08031652 0.1220269 0.155339806
1995 Q4 0.273376583 0.205786527 0.155339806
1996 Q1 0.021933445 0.144359878 0.155339806
1996 Q2 0.00421046 0.020231297 0.155339806
1996 Q3 0.003081124 0.026665137 0.155339806
1996 Q4 0.022338126 0.062035422 0.155339806
1997 Q1 0.002208961 0.032364264 0.155339806
1997 Q2 0.007760877 0.021922762 0.155339806
1997 Q3 0.030370234 0.040464107 0.155339806
1997 Q4 0.157224366 0.117288985 0.155339806
1998 Q1 0.102470691 0.211801407 0.155339806
1998 Q2 0.122692858 0.103421087 0.155339806
1998 Q3 0.438194378 0.147042841 0.155339806
1998 Q4 0.286798929 0.251791891 0.155339806
1999 Q1 0.057956325 0.116698686 0.155339806
1999 Q2 0.018760036 0.041381871 0.155339806
1999 Q3 0.019718592 0.03245525 0.155339806
1999 Q4 0.013833801 0.060243401 0.155339806
2000 Q1 0.070034682 0.072168018 0.155339806
2000 Q2 0.13500705 0.100209534 0.155339806
2000 Q3 0.673393536 0.425850264 0.155339806
2000 Q4 0.90535333 0.597569434 0.155339806
2001 Q1 0.340496691 0.280835573 0.155339806
2001 Q2 0.010530464 0.026969689 0.155339806
2001 Q3 0.017542941 0.015735157 0.155339806
2001 Q4 2.39E-06 5.04E-04 0.155339806
2002 Q1 3.90E-08 2.70E-05 0.155339806
2002 Q2 5.51E-05 1.20E-05 0.155339806
2002 Q3 0.150262218 0.00180435 0.155339806
2002 Q4 0.042597802 0.001244064 0.155339806
2003 Q1 0.035399902 7.75E-04 0.155339806
2003 Q2 0.050235123 0.002268851 0.155339806
2003 Q3 0.018772951 1.90E-04 0.155339806
2003 Q4 0.001303957 8.38E-05 0.155339806
2004 Q1 0.01233656 2.85E-04 0.155339806
2004 Q2 5.28E-05 3.57E-05 0.155339806
2004 Q3 0.005200142 4.54E-04 0.155339806
2004 Q4 0.010211624 0.004962884 0.155339806
2005 Q1 0.003537739 0.01045628 0.155339806
2005 Q2 0.083175196 0.021689604 0.155339806
2005 Q3 0.100172027 0.024645511 0.155339806
2005 Q4 0.198711713 0.106934469 0.155339806
2006 Q1 0.245745836 0.267131641 0.155339806
2006 Q2 0.307163288 0.24487736 0.155339806
2006 Q3 0.6440535 0.346564515 0.155339806
2006 Q4 0.622142007 0.527860448 0.155339806
2007 Q1 0.773573225 0.465637389 0.155339806
2007 Q2 0.34931755 0.228952411 0.155339806
2007 Q3 0.30080912 0.177836819 0.155339806
2007 Q4 0.693716623 0.130813825 0.155339806
2008 Q1 0.164967179 0.019060498 0.155339806
2008 Q2 0.017984717 0.001889538 0.155339806
2008 Q3 0.006040944 9.91E-04 0.155339806
2008 Q4 0.074476593 0.001158343 0.155339806
2009 Q1 0.049766662 0.00155568 0.155339806
2009 Q2 0.001942231 1.10E-04 0.155339806
2009 Q3 0.004176939 1.91E-05 0.155339806
2009 Q4 4.61E-04 7.43E-05 0.155339806
2010 Q1 0.00218446 2.59E-05 0.155339806
2010 Q2 0.058748568 1.03E-04 0.155339806
2010 Q3 0.180043019 0.001479571 0.155339806
2010 Q4 0.041570656 0.001659045 0.155339806
2011 Q1 0.008560821 3.09E-04 0.155339806
2011 Q2 0.055982668 5.07E-04 0.155339806
2011 Q3 0.172378502 0.011468181 0.155339806
2011 Q4 0.201775091 0.010568383 0.155339806
2012 Q1 0.161278324 0.012516918 0.155339806
2012 Q2 0.218650929 0.017730337 0.155339806
2012 Q3 0.306572452 0.018675372 0.155339806
2012 Q4 0.239016368 0.015789649 0.155339806
2013 Q1 0.248508438 0.015590876 0.155339806
2013 Q2 0.098409952 0.008141195 0.155339806
2013 Q3 0.101329654 0.00215366 0.155339806
2013 Q4 0.084002384 0.002968007 0.155339806
2014 Q1 0.048619307 0.001229114 0.155339806
2014 Q2 0.044365735 0.001486811 0.155339806
2014 Q3 0.010414259 8.28E-04 0.155339806
2014 Q4 0.011536625 0.001360694 0.155339806
2015 Q1 0.034439885 0.001597229 0.155339806
2015 Q2 0.01799218 0.001106157 0.155339806
2015 Q3 0.023270447 0.001089447 0.155339806
2015 Q4 0.008444114 0.00168793 0.155339806
2016 Q1 0.078118983 0.00514456 0.155339806
2016 Q2 0.151759396 0.006239692 0.155339806
2016 Q3 0.087026008 0.008911139 0.155339806
2016 Q4 0.019044767 0.002732285 0.155339806
2017 Q1 0.051041293 0.002138982 0.155339806
2017 Q2 0.11628367 0.008044382 0.155339806
2017 Q3 0.09586662 0.013209234 0.155339806
2017 Q4 0.083976341 0.013066467 0.155339806
2018 Q1 0.060362268 0.012682809 0.155339806
2018 Q2 0.050514394 0.014180673 0.155339806
2018 Q3 0.048891218 0.016043751 0.155339806
2018 Q4 0.413215198 0.040192742 0.155339806
2019 Q1 0.538691549 0.153063172 0.155339806
2019 Q2 0.729136836 0.189792992 0.155339806
2019 Q3 0.639655895 0.257072288 0.155339806
2019 Q4 0.373065111 0.096983171 0.155339806
2020 Q1 0.283136278 0.099395643 0.155339806
2020 Q2 0.413673995 0.026985989 0.155339806
2020 Q3 0.383297991 0.080439936 0.155339806
2020 Q4 0.382206821 0.040075167 0.155339806
2021 Q1 0.235430983 0.01749786 0.155339806
2021 Q2 0.172980431 0.094732523 0.155339806
2021 Q3 0.136678729 0.047302047 0.155339806
2021 Q4 0.018519715 0.015995532 0.155339806
2022 Q1 6.10E-06 0.004000391 0.155339806
2022 Q2 0.004456338 0.00130339 0.155339806

Note: This chart depicts fitted recession probabilities, conditional on being in an economic expansion, using quarterly data from 1962Q2 to 2022Q1. The model using two explanatory variables: the current policy gap and headline inflation slope. The black dotted line marks the unconditional probability of transitioning from an expansion into a recession, which is 15.5%. Shaded bars indicate periods of business recession as defined by the National Bureau of Economic Research (NBER): December 1969–November 1970, November 1973–March 1975, January 1980–July 1980, July 1981–November 1982, July 1990–March 1991, March 2001–November 2001, December 2007–June 2009, and February 2020–April 2020.

Sources: Interest rate data from FRB. Expected inflation and real rates from ABC model.

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Figure 2. Policy Gap, Inflation Slope ahead of Recessions and Current Values
Quarters from recession Current Policy Gap Inflation Slope
25th percentile Median 75th percentile Current value 25th percentile Median 75th percentile Current Value
-6 0.88245 1.11765 2.262175 -2.8245 -0.2860375 0.6869125 0.94955 -0.62075
-5 0.929775 1.22645 2.6017 -2.8245 -0.51421875 0.6477 0.8844 -0.62075
-4 1.558275 1.94485 2.4608 -2.8245 0.08728125 0.4312875 0.804025 -0.62075
-3 0.776275 1.4572 2.2438 -2.8245 -0.57885 0.0378375 0.4581875 -0.62075
-2 1.363 1.6992 2.66475 -2.8245 -0.24125 0.065975 0.407175 -0.62075
-1 1.04775 1.541 2.38205 -2.8245 0.0857125 0.16575 0.2674875 -0.62075

Note: These charts show the evolution of the policy gap and inflation slope leading up to recessions using quarterly data from 1962Q2 to 2022Q2. Shaded bands mark the upper and lower quartiles and the grey vertical bar indicates the beginning of a recession episode. The dashed line shows the current value of each measure for 2022Q2.

Source: Authors' calculations.

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Figure 3. Expected Path of the Policy Gap, Core Inflation and Probability of Recession under Two Scenarios
Date Current Policy Gap Core Inflation Gap Probability of Recession Path
Baseline Scenario Tighter Policy Scenario Baseline Scenario Tighter Policy Scenario Baseline Scenario Tighter Policy Scenario
2022 Q2 -3.656090022 -3.656090022 3.406236826 3.406236826 0.001685531 0.001685531
2022 Q3 -1.554356847 -0.823510977 2.290675654 2.274870375 0.10265102 0.147329054
2022 Q4 -0.563141319 0.701224396 1.669569417 1.457730571 0.235621349 0.3502293
2023 Q1 -0.090154671 1.670526229 1.352345 0.741106399 0.318758526 0.452399546
2023 Q2 0.101932517 2.217101573 1.199122152 0.383175372 0.359455851 0.5159495
2023 Q3 0.151475655 2.598797199 1.111232386 0.192067629 0.373976645 0.56288189
2023 Q4 0.115784376 2.768631668 1.059904808 0.148682104 0.374286166 0.593545193

Note: This chart shows the expected paths of the policy gap, core inflation, and recession probabilities in the baseline scenario (blue line) and the tighter scenario in which monetary policy becomes restrictive in 2023 (red line).

Source: Authors' calculations.

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Last Update: July 12, 2022