A staggering 96% of community bank leaders expect a recession to hit within the next 18 months, according to a new survey by IntraFi, a leading fintech that runs the largest bank deposit network.

Bank CEOs, presidents, COOs, and CFOs from 388 unique institutions nationwide were evenly split between those who saw a recession by the end of this year and those who said it would begin sometime in 2023. Roughly half said that if a recession occurs, the primary fault will lie with the Federal Reserve for raising rates too high and too quickly since the beginning of this year.  

"Bankers have become less confident in the Fed's ability to curb inflation while guiding the economy to a soft landing," said Mark Jacobsen, CEO and Cofounder of IntraFi. "To a degree greater than reflected in the equity markets today, most banks do not believe the Fed can constrain inflation without triggering a recession."

The Fed has raised interest rates three times so far this year, including a 75-basis-point hike in June, the largest since 1994. Many analysts anticipate the central bank will raise rates by another 75 basis points at its July meeting this week. 

In all, 62% of bank leaders surveyed at the end of the second quarter said the Fed is overcorrecting for inflation, 10 percentage points higher than those who said the same in IntraFi's first quarter survey. Another 18% believe the Fed is not raising rates fast and high enough, while 21% said the Fed is on the right track.

While 51% said the primary reason for a recession would be the Fed's overcorrection, another 25% said it would happen due to ongoing supply chain problems. Sixteen percent cited other issues, including a combination of factors.

Banks have also been impacted by the current tight labor market and the so-called "Great Resignation," which has seen workers retiring early or otherwise leaving the workforce. Sixty percent of bankers responded that they have had difficulty in finding employees who are qualified for open positions.

While the top strategy to address this issue has been higher compensation (66%), less than a third of banks have utilized flexible and remote work options to attract and retain employees (31%). Almost 60% of bank leaders said remote work is not an option at their financial institution for any positions, either senior or lower level. Only 21% said remote workers are a viable option for any position, while 15% said it's an option for mid- or lower-level jobs.