The US will slide into recession next year as the Federal Reserve raises interest rates to fight inflation, according to Deutsche Bank economists David Folkerts-Landau and Peter Hooper, according to Bloomberg.
In a study released, Deutsche Bank executives see the Fed raise interest rates by 50 basis points in its next three sessions as the central bank moves to raise interest rates above 3.5% by the middle of next year.
The Fed raised interest rates by 25 basis points last month from a record low of near zero. US interest rates are now at 0.25% -0.5%, with the next meeting of the central bank being in early May.
“Our forecast for a recession in the US next year is still far from average [των υπόλοιπων αναλυτών]The two Deutsche Bank economists acknowledge that in their report, they added: “We expect that this will not be the case for a long time to come.”
In addition to the Fed raising interest rates, Deutsche estimates that the central bank will reduce its balance sheet to 8.9 trillion. USD by almost 2 trillion. by the end of next year – the equivalent of three or four additional rate hikes of 25 basis points.
“The US economy is expected to be hit hard by the Fed’s further tightening by the end of next year and early 2024,” Folkerts-Landau and Hooper said in a report.
According to their forecasts, unemployment in the US will increase significantly, reaching 4.9% in 2024, from 3.6% in March.
The 10-year US yield is expected to climb to 3.3% this year, while stocks will experience a “transitional decline of 20%” by the summer of 2023, amid the recession.
Folkerts-Landau is the group’s chief economist. Hooper, a former board member of the Fed, is head of economic research.
Source: Capital
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