Batten Down the Hatches

The past several years have seen the financial industry basking in historically low interest rates. However, August ushered in a noticeable change to the tune borrowers have been singing, with several hinting at conceivable concerns about having just 60 to 90 days to close as many deals as possible. What is even more problematic is that it’s not just interest rates that are causing a general unease among borrowers. There is also an overarching concern that the current economic malaise will turn into something much worse.    

To that end, the nonpartisan Congressional Budget Office recently issued a warning about the so-called “fiscal cliff” – a combination of tax hikes and spending reductions. The group predicted that the U.S. economy will go into a recession next year if the Bush-era tax cuts expire and automatic spending cuts take effect. In its latest report, the CBO predicts that the U.S. economy will grow by 2.1% in 2012, but fall by 0.5% between the fourth quarter of 2012 and the fourth quarter of 2013 under the fiscal cliff scenario. The CBO said unemployment would jump to around 9% in the second half of 2013 from its current 8.3% if the tax increases and spending cuts take effect.