According to Bloomberg News, the United States will plunge into recession in the coming year as the Federal Reserve hikes interest rates so that the widening and high inflation, as stated by economists David Folkerts-Landau and Peter Hooper of Deutsche Bank in a report on Tuesday.
Exploring the prediction
These economists are seeing the Federal Reserve’s hiking rates by 50 basis points at every forthcoming meeting that is three in a row, as it makes its way to the peak, recording a figure beyond 3.5% by the middle of 2023. The current target of the Federal Reserve for its federal fund rate is 0.25% to 0.5% after it raised levels last month, recording a figure close to zero.
Deutsche Bank, Bloomberg News reports, is one of the most important banks to predict a recession in the United States. Economists at the Goldman Sachs Group Inc., led by Jan Hatzius, stated in a report on Monday that economic shortfall was inevitable, mostly in part since both companies and consumers are “flush” with cash.
According to Folkerts-Landau and Hooper, who acknowledged in the report that their call for a recession in the United States in 2023 is way out of consensus, going on to add that they are expecting that it may not last for so long.
Aside from the hike in Fed rates, the Deutsche Bank also anticipates that the US central bank might as well curb the balance sheet of $8.9 trillion by approximately $2 trillion before the next year comes to an end, which is equivalent to 3 or 4 hikes in the 25 basis points.
Bloomberg News reports that the US economy is also anticipated to take a significant hit from the additional tightening of the Federal Reserve towards the end of next year or beginning of 2024, as stated by Folkerts-Landau and Hooper that they have mentioned in a report known by the name “Over the Brink.”
As per the forecast, unemployment in the United States will rise steeply by 4.9% in 2024, while in March, joblessness was found ticking at 3.6%.
While Folkerts-Landau is the chief group economist, Hooper, the former Fed official, is now the global head of economic research.
