What is a recession? When the economy shrinks
By SendPay Business · · 2 min read
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A recession is a period when a country's economy shrinks instead of growing. People spend less, businesses invest less, and unemployment usually rises.
How it is defined
A common rule of thumb, used in the UK and many other countries, is two quarters in a row of falling output, measured by gross domestic product. This is often called a technical recession. In the US, a committee at the National Bureau of Economic Research looks at a wider set of data, such as jobs and income, before calling one.
What usually happens
- Unemployment rises and wage growth slows.
- Central banks often cut interest rates to support spending.
- Banks tend to lend more carefully, and more loans go bad.
- Some businesses struggle with cash flow as customers cut back.
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Currencies in a recession
Expectations of lower interest rates can weaken a country's currency. At the same time, safe-haven currencies can rise when investors get nervous, so the effect depends on where the recession is and how widespread it is.
Where SendPay fits
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Questions people ask
What is a central bank base rate?
The interest rate a central bank sets, which shapes other rates.
Base rates →What is a safe haven currency?
A currency investors buy when markets are nervous.
Safe haven currencies →Read next
Spotted a mistake or something out of date? and we'll fix it. How our guides are made
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. Other companies named in this guide are reference points only and are not affiliated with SendPay Business.