The Federal Reserve’s decision to raise interest rates by 0.75 percentage points has prompted many experts to predict that the U.S. economy will inevitably enter recession at one point. Deutsche Bank seems to be the most bullish in its forecasts and is now predicting that recession will occur “earlier than expected.”
Deutsche Bank has been warning its clients about the incoming recession as early as April. At the time, the bank forecasted that the recession was coming by end-2023. However, after the recent interest rates hike, DB’s Chief U.S. economist Matt Luzzetti adjusted its original prediction.
“The Fed has undertaken a more aggressive hiking path, financial conditions have tightened sharply, and economic data are beginning to show clear signs of slowing,” said Luzzetti in a note sent to clients late last week. “In response to these developments, we now expect an earlier and somewhat more severe recession.”
Among other things, Luzzetti’s note also addresses the changes in the unemployment rate. As the economy slows down, the unemployment rate is expected to go up and reach 5.5 percent in 2024.
Goldman Sachs recently also made adjustments to their predictions regarding the recession. According to Goldman’s Chief Economist Jan Hatzius, the bank sees “recession risk as higher and more front-loaded.” As a result, Hatzius adjusted his recession probability from 15 percent to 30 percent.