Deutsche Bank predicts recession in US next year

The US economy will enter recession in 2023 as the US Federal Reserve raises rates, Report informs with reference to the Deutsche Bank report titled Over the Brink.

Banking analysts David Folkerts-Landau and Peter Hooper said that the US economy will take a big hit from additional Federal Reserve tightening in late 2023 and early 2024.

In their opinion, the US Federal Reserve will raise the key rate by 0.5 percentage points at the next three meetings, and by mid-2023, the rate will exceed 3.5%. The current target range for the federal funds rate is 0.25-0.5%.

In addition, by the end of next year, the Federal Reserve will reduce the amount of assets on its balance sheet by almost $2 trillion from the current $8.9 trillion. For monetary policy, this is equivalent to another 3-4 rate hikes of 0.25 percentage points, Bloomberg quotes economists.

Deutsche Bank predicts that by the summer of 2023, the US stock market will fall by 20%, and the yield on 10-year US government bonds will rise to 3.3% at the end of this year. Unemployment in the United States in 2024 will jump to 4.9% from 3.6% in March, economists expect.