Looming recession: Deutsche Bank is the first financial house to expect a recession in the United States | news

Consumer prices have increased by nearly 8%
Aggressive US monetary tightening
The inverted yield curve destabilizes investors

Consumer prices in the United States rose nearly 8% in February, the highest rate in 40 years. At the same time, the inflation rate was nearly 300% higher than the 2% target set by the US Federal Reserve. Inflationary pressures continue to mount, energy and food prices have skyrocketed since the start of the war in Ukraine, so the Fed must now respond with a rapid rise in interest rates to rein in price. Fed Chairman Jerome Powell said in his March 21 speech, “We have the tools and we will use them to restore price stability.” He also referred to examples from the past in which it was possible to fight inflation by raising interest rates.
“We no longer see the Fed making a soft landing. Instead, we assume that more aggressive monetary tightening will drag the economy into recession,” Deutsche Bank’s Matthew Luzzetti told CNN Business. Deutsche Bank predicts a 20% stock market crash and recession in the summer of 2022, citing the severe combination of geopolitical events and massive US monetary policy tightening as the reason for this.

Inverse yield curve

Negative economic signals also came from the bond market in late March, when interest rates on short-term bonds rose above those on long-term bonds. A phenomenon that worries both investors and economists, a negative yield curve has been the harbinger of a recession in the past. However, Deutsche Bank expects a slight recession, accompanied by an unemployment rate of more than 5%, which is not comparable to the peak values ​​of 2009 and 2020, according to the CNN article. The big bank also expects inflation and the unemployment rate to recover by the end of 2024.

Probability of growing recession

Other economists also assume an increasing probability of a recession. For example, Mark Zandi, chief economist at Moody’s Analytics, told CNN or Goldman Sachs, who estimated the probability of a recession at 35%. In his letter to shareholders, JPMorgan CEO Jamie Dimon also warns of an unprecedented combination of risks for investors: inflation, the combination of rising interest rates and the war in Ukraine will increase significantly. risks in the future.

editorial office finanzen.net

Selected leveraged products on Deutsche Bank AGWith knockouts, speculative investors can participate disproportionately in price movements. Simply select the desired leverage and we will show you the appropriate products on Deutsche Bank AG

Leverage must be between 2 and 20

No data

More news about Deutsche Bank AG

Image sources: Philip Lange / Shutterstock.com, ilikeyellow / Shutterstock.com

Leave a Comment