United States in recession in 2023 and all because of the interest rate hike decided by the Federal Reserve. To launch the prediction Deutsche Bank that an economic recession is on the horizon in the United States.
“The Fed will no longer see a soft landing,” Deutsche Bank economists led by Matthew Luzzetti said in a statement. “Instead, we expect a more aggressive monetary policy tightening will push the economy into a recession.”
The German bank’s analysis comes as the Fed takes a more hawkish approach to fighting inflation, which is at its highest level since 1982. Politicians raised rates by a quarter of a percentage point in March, and have since reported that there will be a faster increase, of half a percentage point, at the May meeting.
Deutsche Bank: recession warning in 2023
The Fed essentially does not fear the recession and on the contrary, it says it is ready for a series of rate hikes of half a percentage point to fight inflation “really too high”, second Lael Brainard, member of the Board of Governors of the US Central Bank, e Patrick Harker, president of the Philadelphia Fed. A drastic reduction in its budget, which shot up to nearly $ 9 trillion with the pandemic, is also in sight. This is what emerges from the minutes of the meeting of March 15 and 16, which confirm a hawkish Fed, never so aggressive since 1994. Some economists believe that the Fed has waited too long to deal with the explosion of inflation, while others have expressed the concern that moving too fast to stabilize prices risks triggering an economic recession.
Deutsche Bank economists said that a recession will be inevitable as the Fed is pumping the economic brakes, warning that price stability will only be achieved “through a tight monetary policy stance that significantly affects demand.” Analysts also predict a mild recession that will begin in the last quarter of next year and continue into the first quarter of 2024, peaking above 5% unemployment.
However, Powell dismissed concerns that further tightening by the central bank will trigger a recession and maintained optimism that the Fed can strike a delicate balance between taming inflation without crushing the economy.
“The likelihood of a recession in the next year is not particularly high,” Powell told reporters at the Fed’s March meeting, citing the strong labor market, solid wage growth and strong corporate and household balance sheets.
“All the signs indicate that this is a strong economy, and that it will be able to thrive in the face of less accommodative monetary policy.”
Roche: it is not a recession rather a “war-divestment”
And if DB launches the alarm sirens on the stars and stripes economy, another authoritative analyst launches them in relation to the whole world. The global economy is likely entering a “war-cession,” according to the investment veteran David Roche, president of Independent Strategy, and the markets are underestimating its durability.
Evidence of the atrocities committed against civilians in Ukraine by Russian forces will prevent any possibility of a quick peace negotiation with Russian President Vladimir Putin. As such, the West’s only option is to seek regime change in Russia, Roche said considering Putin will not withdraw from Ukraine without a “victory”.
“Putin has no intention of exchanging the withdrawal for a reduction in sanctions, so the sanctions remain in place and I think the implications for Europe are that we will see a recession, because the sanctions will increase and move towards a total energy blockade.”
Thus Roche said Ukrainian officials have warned that further atrocities will likely be uncovered in cities recaptured by retreating Russian soldiers, and investors will then no longer be able to separate politics from markets.
“All this is a huge shock dto the supply side that will continue in food, energy, metals and I can continue. This will continue while, at the same time, we are dealing with inflation around the world, we are dealing with rising interest rates – I think the 30-year Treasury yield will be at least 3.5% between a year – and we are looking, of course, at supply disruptions in China due to what is happening for Covid, which people are not talking about, but which are obviously another side of the supply to the global system … in a normal recession , production and demand go down, inflation goes down. In this kind of recession, a ‘war-cession’you actually have output that falls at the same time that costs and inflation rise.