Analysts at Deutsche Bank recently made a significant realignment in their view of the U.S. economy, which will move from its main four-decade growth phase (1980-2020) to more frequent boom-bust cycles and recessions. This is based on several factors, including rising inflation, which may limit the bank's flexibility to balance economic growth at home and abroad.
In addition, Deutsche Bank also said that the US economy is on the verge of a deep recession, even worse than previously expected, and the unemployment rate is expected to rise significantly. This is related to a series of large interest rate hikes implemented by the US Federal Reserve System in order to curb the highest inflation in four decades. Bank economists noted in a note to clients that if the Fed had acted earlier and more aggressively, the long-term damage to the economy would have been less.
Deutsche Bank initially had a "mild" recession, but they further deepened their grip on the recession as they believed inflation was so high that the Fed would have no choice but to significantly raise the benchmark federal interest rate to suppress consumer demand. In a report titled "Why the Coming Recession Will Be Worse Than Expected," they wrote: "We think it's ......The Fed will have to hit the brakes more urgently and will need a deep recession to bring inflation under control."
On Wall Street, there are growing concerns that the Federal Reserve may inadvertently trigger a recession in its fight against inflation. While Fed Chair Jerome Powell pushed back fears that further Fed tightening would trigger a recession and maintained optimism that the Fed would be able to curb inflation without hurting the economy, he acknowledged that the task was daunting and said it was "absolutely necessary" for the bank to restore stability.
In summary, Deutsche Bank analysts' new perspective on the U.S. economy highlights the possibility of more frequent economic fluctuations in the future and a recession that is worse than previously thought. These** not only highlight the uncertainties that exist in the current economic environment, but also provide important insights for investors and policymakers to help them prepare for the economic challenges that may come their way.
February** Dynamic Incentive Program