The Federal Reserve's staff economists said there's a major risk of a US recession next year.
They flagged tepid consumer spending, foreign headwinds, and tighter financial conditions.
The economists join a long line of experts warning the US is headed for a painful downturn.
The Federal Reserve's own economists have sounded the alarm on a potential recession, warning there's a serious risk that the US economy slumps into a painful downturn next year.
The central bank's staff flagged rising pressure on consumer spending, trouble overseas, and higher borrowing costs as near-term headwinds, the minutes from the Fed's November meeting show.
"Sluggish growth in real private domestic spending, a deteriorating global outlook, and tightening financial conditions were all seen as salient downside risks," the minutes read, adding that further interest rate rises could make matters worse.
The Fed's economists said it was a virtual coin toss whether the economy would eke out growth or slump into a recession in 2023.
"The staff, therefore, continued to judge that the risks to the baseline projection for real activity were skewed to the downside and viewed the possibility that the economy would enter a recession sometime over the next year as almost as likely as the baseline," the minutes read.
The Fed's in-house economists have joined a long line of investors, executives, academics, and other experts warning a US recession is likely, if not inevitable, next year. Those calls have grown louder in recent months, as stubborn inflation has raised the prospect of ever-higher interest rates and more pain for consumers and businesses.
Inflation soared to a 40-year high of 9.1% in June, and remained at 7.7% in October, well above the Fed's target of 2% a year.
Fed chair Jerome Powell and his colleagues have responded by hiking rates from near zero in March to a range of 3.75% to 4%, and signaling rates could peak above 5% for the first time since 2007.
As a result, American consumers face a double-whammy of surging prices and steeper interest payments on their car loans, credit cards, mortgages, and other debts. Russia's invasion of Ukraine and rolling COVID-19 lockdowns in China are also squeezing households as they've disrupted global supply chains and driven up the costs of food, energy, and other essentials.
A bright spot in the otherwise gloomy minutes was the majority of Fed officials supporting a slower pace of tightening, so they can properly assess how the flurry of rate hikes have affected the economy. The upshot could be a 50-basis-point hike in December, after four straight mega-hikes of 75 basis points.