Deutsche Bank raised eyebrows earlier this month by becoming the first major bank to forecast a US recession. 9News
"We will get a major recession," Deutsche Bank economists wrote in a report to clients overnight.
To make its case, Deutsche Bank created an index that tracks the distance between inflation and unemployment over the past 60 years and the Fed's stated goals for those metrics. The good news is that Deutsche Bank sees the economy rebounding by mid-2024 as the Fed reverses course in its inflation fight.Of course, no one knows precisely how this will play out.
"We do not need a recession but probably do need growth to slow to a somewhat below-potential pace, a path that raises recession risk," Goldman Sachs economists wrote in a report on Friday.UBS is similarly hopeful that the economic expansion will continue despite the Fed's shift to inflation-fighting mode.
If inflation does stay elevated, the Fed will be forced to consider more dramatic interest rate hikes. Markets are predicting the Reserve Bank will increase interest rates several times before the end of next year.
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