As the market decline continues after a hawkish statement from the Federal Reserve on Tuesday afternoon, economists have lowered their forecasts for the economy in 2023.

“While we don’t necessarily have a recession in our forecast, we do see the risk of a recession increasing,” said Beth Ann Bovino, chief U.S. economist for S&P Global Ratings. “We now have it at around 30%; we see the risk becoming much more significant in 2023 when these cumulative Fed rate hikes to attack inflation begin to weigh on mortgage payments and monthly payments.

Bovino joined Yahoo Finance Live on Tuesday to discuss recession risks in light of the Federal Reserve’s ongoing rate hikes as well as the latest economic data on the consumer economy.

“Right now people are still sitting on nice savings,” she said. “And the reason for that is that people have spent so many months in quarantine, a lot of people haven’t spent and gone out.”

With demand for services picking up, she noted, consumers are starting to shift away from goods and spend more money on in-person services that have been limited or canceled due to the pandemic.

SAN FRANCISCO, CALIFORNIA – MAY 12: United Airlines customers prepare to check in for flights at San Francisco International Airport on May 12, 2022 in San Francisco, California. According to a Bureau of Labor Statistics report, airline fares jumped 18.6% in April as demand for air travel increased due to the easing of travel restrictions related to COVID-19. (Photo by Justin Sullivan/Getty Images)

“I want to note that we saw a good reading for core spending, so that was also strong,” Bovino said. “In terms of the shift from goods, essentially goods, to services, that makes sense because we’re seeing a re-opening of the US economy, although Omicron or the newer variant has certainly raised concerns.”

Retail spending rose 0.9% in April, marking the fourth straight month of increases. Much of the increase centered on higher consumer spending on restaurants, vehicles and clothing. Other service sectors, such as airline tickets, also saw increased spending last month. Additionally, data from JP Morgan Chase monitoring credit and debit card transactions revealed an increase in dining and entertainment spending among consumers.

“It gives us a cushion this year, but eventually people will close their wallets,” Bovino said. “That doesn’t bode well for the US economy going forward.”

Despite higher consumer spending and a nearly full labor market, significant macroeconomic concerns kept investors hesitant. For one thing, many industries are still struggling with a labor shortage that has left businesses across the country understaffed. Additionally, analysts have expressed concern over recent jobs reports showing a growing number of people leaving the workforce, even as official unemployment figures remain extraordinarily low.

The stock market crashed earlier this month after the Federal Reserve raised the federal funds rate by half a percentage point – the biggest such increase since 2001.

“The Fed is responding by raising rates very aggressively,” Bovino said of expectations for future Fed rate hikes. “The 50 point base rise we’ve seen most recently isn’t just – it’s not just once. We’re expecting several more this year while we’re at it – and there’s been talk , although that was pushed back by Chairman Powell, up 75 basis points.

Ihsaan Fanusie is a writer at Yahoo Finance. Follow him on Twitter @IFanusie.

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