Prominent economist Steve Hanke has issued a stark warning, predicting a potential US recession by the end of 2025. He attributes this forecast to a combination of persistently weak labor markets, rapidly expanding federal fiscal deficits, and the disruptive impact of unpredictable tariff policies.
Hanke specifically points to erratic tariff policies under the Trump administration as a significant factor disrupting international trade flows and undermining investor confidence. This uncertainty, he argues, acts as a drag on economic growth.
The scale of the fiscal challenge is underscored by data showing the federal deficit reached $1.1 trillion by April 2025, marking a 13% increase compared to the same period the previous year. This growing deficit contributes significantly to overall economic instability.
Hanke contends that conventional interest rate cuts alone are insufficient to counter these headwinds. He advocates for a more aggressive monetary policy approach, specifically calling for an expansion of the money supply growth rate to 6% to provide necessary economic stimulus.
Central to Hanke’s analysis is the concept of ‘regime uncertainty’ – the unpredictable nature of major policy shifts causing businesses and investors to delay or cancel investment plans. This hesitation further dampens economic activity.
While focused on traditional finance, such macroeconomic instability predictions are closely monitored by cryptocurrency markets, as they can influence investor risk appetite and capital flows into alternative assets.