The Deutsche Bank this week warned that the Federal Reserve’s rising interest rates would trigger a U.S. recession beginning late next year as the country grapples with some of the fastest-growing inflation in decades.
“We no longer see the Fed achieving a soft landing. Instead, we anticipate that a more aggressive tightening of monetary policy will push the economy into a recession,” the Deutsche Bank economists said in the report, according to CNN.
The bank specifically predicted a “mild recession” with unemployment peaking above 5 percent in 2024. But the bank also warned that there was “considerable uncertainty” surrounding the matter.
The economists added that the Fed would need an approach to drastically slow the economy down to combat the predicted recession.
“It is now clear that price stability … is likely to only be achieved through a restrictive monetary policy stance that meaningfully dents demand,” the report added.
“It is of paramount importance to get inflation down. Accordingly, the committee will continue tightening monetary policy methodically through a series of interest rate increases and by starting to reduce the balance sheet at a rapid pace,” Fed Governor Lael Brainard said in a Tuesday speech.
The predicted unemployment rates, however, remain nowhere near the unemployment figures seen in 2009 and in 2020 at the start of the pandemic.
Also on Tuesday, the bank warned that Germany would face an “unavoidable” recession in the event Russian gas and oil were cut off.
“The situation would be even worse if imports or supplies of Russian oil and natural gas were to be halted,” Christian Sewing, CEO of Deutsche Bank said in his capacity as president of the Association of German Banks.
“A significant recession in Germany would then be virtually unavoidable. The question of government aid measures for companies and industries would then become even more pressing,” he added.