Deutsche Bank has updated its recession forecast. Bank economists now see “a more severe recession than ever before”. “The Fed has taken a more aggressive hiking path, financials have tightened sharply and economic data is starting to show clear signs of slowing,” economists said.
Deutsche Bank recession forecast
Deutsche Bank’s chief US economist, Matt Luzzetti, explained in a note to customers on Friday that the recession would come sooner and would be more severe than previously predicted, Yahoo Finance reported.
The bank said in April that the US economy would be in a “big” recession by the end of next year.
However, Luzzetti explained in the note: “Since that time, the Fed has taken a more aggressive hiking path, financial conditions have tightened increasingly and economic data is beginning to show clear signs of slowing.” The Deutsche Bank economist continued:
In response to these developments, we now expect an earlier and somewhat more severe downturn.
The Federal Reserve last week raised its benchmark interest rate by 75 basis points – the biggest increase since 1994.
In its semi-annual report to Congress released on Friday, the Fed said: “The Committee is fully aware that high inflation places significant hardship, especially on those who are least able to meet the high costs of essential goods.” are … the committee’s commitment to restoring price stability – which is essential to maintaining a strong labor market – unconditionally.”
Deutsche Bank economist said:
Further tightening of financial conditions could easily extend the risks of a recession to the end of the year, which could short-circuit the Fed’s tightening cycle.
He added: “That said, high inflation during that period will likely hinder the Fed’s ability to cut rates to counter the slowdown. On the other hand, a more resilient economy in the near term with more stable inflationary pressures is our Fed. upside risk to the outlook.
Earlier this month the World Bank warned of a global recession. “For many countries, it will be difficult to survive a recession,” President David Malpass said.
Others warning of an impending recession include Tesla CEO Elon Musk, Citigroup CEO Jane Fraser, Soros Fund CEO Don Fitzpatrick, The Big Short investor Michael Bury and Rich Dad Poor Dad author Robert Kiyosaki.
On Sunday, US Treasury Secretary Janet Yellen told ABC News, “I don’t think a recession is inevitable at all.” Furthermore, a Wall Street Journal poll showed that economists have dramatically overstated the likelihood of a recession. The publication reported Sunday that they now hold it up from 44% in the next 12 months, 28% in April and 18% in January.
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