Spiraling inflation and aggressive rate hikes by the Federal Reserve will drive the US economy into a 1990-style recession in spring, Fitch Ratings warned on Tuesday.

The agency has downgraded its growth forecast for this year and for 2023, with the US GDP now expected to grow by 0.5% next year, down from the 1.5% growth predicted in June.

According to Fitch, the economic slowdown will push the unemployment rate in the country from the current 3.5% to 5.2% in 2024 and entail a loss of millions of jobs. The report says that inflation remains the biggest problem for the US economy with increased cost of living hitting cash-strapped consumers and undermining their confidence.

The agency has warned that inflation will “prove too much of a drain” on household income next year, shrinking consumer spending which will lead to a downturn during the second quarter of 2023.

Consumer prices surged more than expected in September with inflation running way above the Fed’s 2% target. This has reinforced expectations that the Federal Reserve will continue its aggressive inflation-fighting campaign and resort to another 75 basis points interest rate hike next month.

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