Deutsche Bank Joins Predictions of Coming Recession – Experts can’t agree when a recession will hit the U.S. economy – but they do seem to agree that a recession is coming. After Former Federal Reserve Governor Lawrence Lindsey warned on Monday that rising inflation will slash consumer spending and trigger a recession by July, Deutsche Bank issued its own forecast for a similar crisis.
Deutsche Bank, however, predicts that a recession is likely sometime next year.
The German bank is the first major world bank to formally predict that the United States will face a recession soon, but said that it would likely be “moderate.”
“The US economy is expected to take a major hit from the extra Fed tightening by late next year and early 2024,” Deutsche Bank economists said in a note shared with clients on Tuesday.
“We see two negative quarters of growth and a more than 1.5 percent point rise in the US unemployment rate, developments that clearly qualify as a recession, albeit a moderate one.”
Deutsche Bank economist based their prediction on the Federal Reserve’s decision to raise interest rates in March by a 0.25 percentage point for the first time in three years. The move was designed to help control rising prices of food and consumer goods, which have reached a 40-year-high.
Economists also predicted that, despite a coming recession, the overall outlook for the U.S. economy is positive.
As the Federal Reserve reverses some rate hikes and inflation recedes, the bank’s economists said, growth will return.
“We acknowledge huge uncertainty around these forecasts, but also note that the risks to the downside and of a deeper downturn are considerable,” the note says.
Recession Time – JPMorgan Chase Warns of “Unprecedented” Problems
In his annual shareholder letter, JPMorgan Chase CEO Jamie Dimon said that the U.S. economy is facing “unprecedented” problems, citing high inflation and the Russian invasion of Ukraine.
“The confluence of these factors may be unprecedented,” Dimon said in the letter. “Each of these three factors mentioned above is unique in its own right: The dramatic stimulus-fueled recovery from the COVID-19 pandemic, the likely need for rapidly raising rates and the required reversal of QE, and the war in Ukraine and the sanctions on Russia.”
Dimon added that today’s economic climate is unlike anything the West has seen in the past and that the confluence of circumstances – the end of the pandemic, the high government spending, inflation, fuel supply issues from Russia, and food shortages in Europe will “dramatically increase the risks ahead.”
Economists might not be able to agree on what is coming, but it’s clear that something is coming.
Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.