Recent research has linked macroeconomic shocks with household financial distress. For instance, José Mustre-del-Río, Juan M. Sánchez, Ryan Mather, and Kartik Athreya show that regions with a higher share of credit card delinquency had more severe responses to macroeconomic shocks during the past two recessions. This post takes the topic a step further by exploring whether delinquency rates for households and businesses can help anticipate recessions.

We use delinquency rates on business loans and credit card loans for all banks, published by the Board of Governors of the Federal Reserve System, to represent financial distress. Delinquency rates are calculated as the ratio of the dollar amount of delinquent loans to the dollar amount of all loans outstanding.

In the FRED graph above,

• the orange dashed line shows delinquency rates for business loans, i.e., the financial conditions of businesses;
• the blue solid line shows delinquency rates for credit card loans, i.e., the financial conditions of consumers and households;
• and the shaded areas indicate recessions.

The overall pattern: Delinquency rates substantially increased around the 1990-1991, 2001, and 2008-2009 recessions, peaking at the end of each recession. More importantly, these rates began rising several quarters before the recessions started.

The business loan delinquency rate associated with the 2008-2009 recession began increasing in the fourth quarter of 2006 and continued for five consecutive quarters before the recession began. The rate associated with the 2001 recession behaved similarly, rising in the fourth quarter of 1999 and continuing to rise for six consecutive quarters until the recession started. Business loan delinquency also signaled the 1990-1991 recession, with rates rising for three consecutive quarters prior to the recession.

The credit card loan delinquency rate exhibited similar cyclical patterns: It began rising a few quarters before the recessions and peaked toward the end of each downturn. Before the 2008-2009 recession, it began increasing in the fourth quarter of 2005. Before the 2001 recession, it began increasing in the first quarter of 2000.

It’s important to emphasize that delinquency rates can rise without a recession occurring in the next year (false positives). In 2016, for instance, business loan delinquency rose, but a recession didn’t occur until 2020. From 1994 to 1996, credit card loan delinquency rose, but a recession didn’t occur until 2001.

What can we learn from this? The FRED graph suggests that delinquency rates may provide insights into future conditions for the US economy. But, since they also produce false positives, they should be considered alongside other indicators to anticipate recessions as accurately as possible.

How this graph was created: Search FRED for “Delinquency Rate on Business Loans, All Commercial Banks.” Next, click on the “Edit Graph” button and select the “Add Line” tab. Search for “Delinquency Rate on Credit Card Loans, All Commercial Banks” and click on “Add data series.” Last, use the “Format” tab to select “Graph type: Line.”

Suggested by Masataka Mori and Juan M. Sánchez.

Every quarter, FOMC meeting participants submit their projections of key economic indicators. The committee releases the Summary of Economic Projections (SEP), containing the median, central tendency, and range of these projections:

• civilian unemployment rate
• headline and core PCEPI
• real GDP growth
• and the federal funds rate.

Projections are generally provided for the current year, the next two years, and the “longer run.” In this blog post, we use ALFRED to look at several recent projections for the unemployment rate, core PCEPI inflation, and the federal funds rate through 2027. At the press conference after the March FOMC meeting, Chair Powell noted that these forecasts are always subject to uncertainty, which is unusually elevated now, and the projections are not a committee plan or decision.

Our first ALFRED graph, above, shows the unemployment rate projections for the fourth quarters of 2025, 2026, and 2027 according to the SEPs released in March 2025, December 2024, and September 2024. Most recently, as shown by the red bar, the median FOMC participant projects that the unemployment rate will average 4.4% in Q4 2025 and drop to 4.3% over 2026 and 2027.

How does this stack up against previous projections for the same period? The projected unemployment rate for 2025 is slightly higher now than it was in December of last year (green bar), but is the same as it was in September of last year (blue bar).

At the press conference, Chair Powell noted that labor market conditions remain solid and that a wide set of indicators suggest that the labor market is broadly in balance.

Our second graph, above, shows the core inflation rate projections for the same years and is more interesting. While the median FOMC participant still expects inflation to return to target by 2027, projections of the inflation rate have been revised upward for 2025. In September, the median participant had projected core inflation to measure only 2.2% by the end of this year. However, over the past 6 months, that projection has shifted up by 0.6 percentage points to 2.8%.

At the press conference, Chair Powell noted that some near-term measures of inflation expectations have recently moved up; however, most measures of longer-term inflation expectations remain consistent with the goal of 2% inflation.

Our final graph shows the median participant’s projections of the federal funds rate. The most recent projections are slightly higher than they were in September 2024 for each year from 2025 through 2027. The 2025 and 2026 projections are now 50 basis points higher than they were in September, and the 2027 projection is now 25 basis points higher.

How these graphs were created: Search ALFRED for “FOMC unemployment” and take the median projection. Click on “Edit Graph,” choose a bar graph, and add two bars with the same series again. Finally, select the proper vintage for each bar. For the other two graphs, proceed similarly with “FOMC Consumption” and “FOMC Fed Funds Rate.”

Suggested by Charles Gascon and Joseph Martorana.

Expectations about inflation are an important indicator of actual future inflation: If market participants expect inflation to be higher, they may elevate prices, increasing the actual inflation rate and creating a self-fulfilling prophecy. In this FRED Blog post, we compare “breakeven” inflation expectations with actual inflation to see how they’ve both evolved over time.

The FRED graph above shows 5-year (medium-term) and 30-year (long-term) breakeven inflation rates, along with the consumer price index (CPI), which measures actual inflation in the economy.

The breakeven inflation rate is the difference in yields between a standard Treasury security, which specifies payments in nominal terms, and an inflation-protected Treasury security (or TIPS), which adjusts its principal with inflation. This difference is a common representation of what markets expect inflation to be in the future—here, after 5 years and 30 years.

Before the COVID recession, the 5-year breakeven inflation rate was generally lower than its 30-year equivalent: Households expected that inflation would be higher in the longer term than the medium term or that current inflation was below the long-term trend. During this period, inflation was frequently below the Fed’s 2% inflation target.

During the period of high inflation in 2021-2022, medium-term inflation expectations were higher than long-term expectations, which may mean that markets believed inflation was higher than the long-term trend and would fall in the coming years.

This belief seems to have been validated, as inflation has since dropped. And, since 2023, medium-term and long-term inflation expectations have started to converge: Markets believe average inflation over the next 5 years will be similar to the average inflation over the next 30 years.

How this graph was created: Search FRED for and select “5-Year Breakeven Inflation Rate (T5YIE).” From the “Edit Graph” panel, under “Modify Frequency,” select “Monthly” and make sure “Aggregation Method” is “Average.” Use the “Add Line” tab to search for and select “30-year Breakeven Inflation Rate (T30YIEM)” and again to search for and select “Consumer Price Index for All Urban Consumers: All Items in U.S. City Average (CPIAUCSL).” Under “Units,” select “Percent Change from Year Ago.” Select the time period 2015-02-01 to 2025-02-01. Use the “Format” tab to scroll down to Line 1 and Line 2, click the plus symbol next to the “Customize” bar, and under “Line style” select “Solid.” For Line 3, under “Line Style” select “Dot” and under “Color” type #666360.

Suggested by Yu-Ting Chiang and Mick Dueholm.