Deutsche Bank’s economists have warned that the U.S. will suffer a major recession next year. However, JPMorgan and Goldman Sachs are more positive about the U.S.’s economic future.
Major US Recession Incoming, According to Deutsche Bank’s Economists
Deutsche Bank’s Tuesday report to clients revealed that it has forecast a stronger downturn for the U.S. Economy than any previous prediction.
The bank’s economists, including David Folkerts-Landau, group chief economist and head of research, explained in the report why the coming recession will be worse than expected. The following was their description:
While we are certain that we will see a significant recession, it is our belief that the Fed will act sooner than expected to minimize the economic impact on the long-term.
The report explains that it will take a long time before inflation falls back to the Fed’s goal of 2%. The authors warned that the central bank will likely engage in the most aggressive monetary tightening since the 1980s, which “will push the economy into a significant recession by late next year.”
The Deutsche Bank economists detailed: “We assume conservatively that a Fed funds rate moving well into the 5% to 6% range will be sufficient to do the job this time … This is partly because the monetary-tightening process will be bolstered by Fed balance-sheet reduction.”
Deutsche Bank is not the only major investment bank that’s less optimistic.
Goldman Sachs has recently calculated that there’s a 35% chance for a recession within the next 2 years. While admitting that it will be very challenging to bring down high inflation, Goldman’s economists wrote in a report Friday:
Although we do not require a recession to occur, growth must slow down to an acceptable level. A path that increases the likelihood of recession is unlikely.
Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a report on Monday: “Inflation should ease from current levels, and we do not expect a recession from rising interest rates.”
Jacob Manoukian, JPMorgan’s head of investment strategy in the U.S., said this month that a recession in the near term is possible but not probable. Meanwhile, Bank of America chief investment strategist Michael Hartnett warned earlier this month that a “recession shock” is coming.
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