Jakarta –
The United States (US) is predicted to sink into a recession this year. The warning came from Deutsche Bank.
Warnings of a slowdown in economic growth were caused by the Federal Reserve’s efforts to bring down very high inflation by raising interest rates. “We (the US) are going into a major recession,” Deutsche Bank economists wrote in a report to clients.
According to Deutsche Bank, inflation is likely to peak and it will take some time before it returns to the Fed’s 2% goal. Thus, it is possible that the central bank will raise interest rates aggressively, thus harming the economy.
“We consider it very likely that the Fed (Federal Reserve) will have to hit the brakes harder, and a deep recession will set in,” Deutsche Bank economists wrote in a report.
To prove how big a recession will be, Deutsche Bank created an index that tracks the distance between inflation and unemployment over the last 60 years.
“History shows the Fed has never been able to fix inflation and even smaller jobs without pushing the economy into a significant recession,” the Deutsche Bank analyst wrote.
The good news is that Deutsche Bank sees the economy rebounding in mid-2024 as the Fed reverses course in its inflation bout.
In line with Deutsche Bank, Goldman Sachs admits that a recession is right in front of the eyes of Uncle Sam’s country. It will be very challenging and difficult to bring down high inflation and wage growth without avoiding a recession.
“While we don’t need and expect a recession, the economy may need growth momentum to slow. It’s the path that increases the risk of a recession,” Goldman Sachs economists wrote in a report.
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