Deutsche Bank Expects Sooner, More Severe US Recession as the Fed Takes ‘Aggressive Hiking Path’ – Economics Bitcoin News

Deutsche Bank updated their recession prediction. The bank’s economists now see “an earlier and somewhat more severe recession” than previously predicted. “The Fed has undertaken a more aggressive hiking path, financial conditions have tightened sharply and economic data are beginning to show clear signs of slowing,” said the economists.

Deutsche Bank’s Recession Forecast

Deutsche Bank’s chief U.S. economist, Matt Luzzetti, explained in a note to clients Friday that a recession will come sooner and it will be more severe than previously predicted, Yahoo Finance reported.

The bank said in April that the U.S.economy will be in a “major” recession by the end of next year.

However, Luzzetti explained in the note: “Since that time, the Fed has undertaken a more aggressive hiking path, financial conditions have tightened sharply and economic data are beginning to show clear signs of slowing.” The Deutsche Bank economist continued:

These developments have prompted us to expect a severer and earlier recession.

The Federal Reserve raised its benchmark interest rate by 75 basis points last week — the biggest increase since 1994.

In its semi-annual report to Congress released Friday, the Fed said: “The committee is acutely aware that high inflation imposes significant hardship, especially on those least able to meet the higher costs of essentials … The committee’s commitment to restoring price stability — which is necessary for sustaining a strong labor market — is unconditional.”

The Deutsche Bank economist noted:

A more severe tightening of financial conditions could easily pull forward recession risks to around the turn of the year, which could short-circuit the Fed’s tightening cycle.

He added: “That said, higher inflation during that period would likely constrain the Fed’s ability to cut rates to counteract the downturn. On the other side, a more resilient economy in the near-term with more persistent inflation pressures would spell upside risk to our Fed view.”

In a warning issued earlier in the month by the World Bank, they warned that there would be a global recession. “For many countries, a recession will be hard to avoid,” said President David Malpass.

Elon Musk is Tesla’s CEO, Jane Fraser from Citigroup and Dawn Fitzpatrick of Soros Fund are some others who warn about an imminent recession. Michael Burry was an investor in The Big Short. Robert Kiyosaki is an author.

On Sunday, U.S. Treasury Secretary Janet Yellen told ABC News, “I don’t think a recession is at all inevitable.” In addition, a survey by the Wall Street Journal showed that economists have dramatically raised the probability of recession. According to Sunday’s report, they now estimate it will be 44% within the next 12 month, up from 28% April and 18% January.

What do you think about Deutsche Bank’s forecast? Leave your comments below.

Kevin Helms

Kevin, a student of Austrian Economics and evangelist since 2011, discovered Bitcoin. He is interested in Bitcoin security and open-source software, network effects, and the intersection of cryptography and economics.