Barrenjoey predicts recession as dollar forecasts tumble

A “relatively short and shallow” recession is now assumed by Barrenjoey, as strategists take the knife to Australian dollar forecasts in the wake of the Fed.

Investment bank Barrenjoey declared a short and shallow Australian recession is a “probable” scenario after increasing its peak cash rate forecast to 3.35 per cent in December following the US Federal Reserve’s hawkish policy decision this week.

Financial markets lifted the implied probability of a 0.5 percentage point cash rate increase from the Mr Evans sees the Australian dollar buying US65¢ at the end of the year, down from an earlier forecast of US69¢, and he now expects the US central bank to lift rates to 4.6 per cent by January 2023, up from 4.1 per cent.

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