Jakarta, CNBC Indonesia – Several of the world’s major central banks announced another rate hike on Thursday, while also firmly indicating that it would continue into next year. A recession is even more inevitable, the higher the interest rate, the greater the risk of a subsequent economic downturn.
The central bank of the United States (USA), also known as the Federal Reserve (The Fed), raised interest rates by 50 basis points to 4.25% – 4.5%, the highest in 15 years. The increase was less than the previous 75 basis points and four times in a row.
However, the Fed has indicated that interest rates will continue to rise into early next year. The Fed dot plot shows that elite Fed officials expect interest rates to range between 5% and 5.25%, meaning there is yet another 75 basis point hike, with the possibility of a 50 basis point increase in February 2023 and a 25 basis point hike before the interim.
Also, most central banks powerful around the world this indicates that interest rates will not be lowered until at least 2024. Higher longerwhich threatens to drive the US economy into a recession.
In addition to the Fed, there is also a European Central Bank (ECB) which yesterday raised interest rates by 50 basis points to 2%.
In addition, the ECB also said it will start reducing its balance sheet by €15 billion a month from March next year until the end of the second quarter of 2023.
Balance deduction (balance) means that the ECB will absorb more liquidity. The goal is the same as other central banks, to reduce inflation.
But on the other hand it must be paid for with an economic contraction.
“The Board of Governors believes that interest rates still need to rise significantly at a steady pace to reach a level high enough to ensure that inflation returns to the 2% medium-term target in a timely manner,” the ECB wrote in an official statement. declaration.
This means that the ECB will continue to raise interest rates next year, like other central banks.
The recession is already in sight. Europe is expected to experience a recession in the first quarter of 2023, according to the latest Reuters poll of economists.
The first quarter of 2023 is only 15 days away, which means that if this prediction is correct, it won’t be long before the blue continent experiences a recession.
In fact, to confirm a recession, gross domestic product (GDP) must contract or grow negatively in two consecutive quarters. However, the release of GDP data usually takes several days or weeks after the end of the quarter, so the certainty of a new recession will be known as early as April 2023.
However, the effects of the recession will certainly be felt during the first quarter of next year.
Median results from the Reuters poll show the probability of a recession in the eurozone at 78%, up from 70% in last October’s poll.
Meanwhile, Bank of America economists expect Uncle Sam’s country to also experience a recession in the first quarter of 2023, when its GDP contracts by 0.4%.
“The bad news is that in 2023 the monetary tightening process will show its impact on the economy,” said Bank of America economist Savita Subramanian. Business Insiderat the end of last November.
Meanwhile, a well-known investor, Michael Burry, predicts that the US will experience a recession for several years.
“What strategies can get us out of recession? What forces can get us out? Nothing. We’ll be in a recession for years,” Burry said on Twitter. Business Insider.
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