The Commerce Department announced Thursday that the unexpected 1.4% drop in gross domestic product occurred during the first quarter. This is a sudden reversal by an economy which had just posted its highest performance since 1984.

This quarter’s negative growth rate was below the subdued Dow Jones estimation of a gain of 1%.

A multitude of factors conspired against growth in the first three months 2022.

The economic slump was caused by rising Omicron Infections to begin the year. Additionally, inflation soared at an unprecedented rate since the 1980s.

Wall Street remains optimistic that there will be no recession but the Federal Reserve is planning to increase its rate of interest to stop further price rises.

Current market pricing indicates the equivalent of 10 quarter-percentage-point interest rate moves that would take the Fed’s benchmark interest rate to about 2.75% by the end of the year. This comes two years after near-zero interest rates were set to allow a recovery from America’s worst recession.

In addition, the Fed stopped buying monthly bonds. This was done to maintain low rates and keep money flowing through the economy. Starting next month, the Fed plans to begin reducing its existing bond holdings slowly but steadily over time. The pace is expected to reach $95 billion per monthly.

Even though economists are still expecting the U.S. not to enter a complete recession, risk is rising.

Goldman Sachs projects a chance of 35% negative growth within a year. Deutsche Bank, in a Wall Street forecast, sees a chance for a “significant recession” to hit the economy between 2023-2024. This is due to the Fed tightening more than current forecasters anticipate.

This all happens after an unprecedented 5.7% GDP increase, the most since 1984. The growth of nearly 70% of America’s economy was driven by consumer spending. However, almost all of growth occurred in the second half of 2021 due to inventory reconstruction from depleted pandemic levels.

For growth to continue into 2022 it will take an end to clogged supply chain and a resolution in Ukraine. These two countries are likely facing pressure from both the Fed and global central banks fighting inflation.

This is news breaking. Keep checking back for more updates.