One of the world's biggest banks has recently warned that a major recession is coming to the United States. Having previously forecasted a "mild" economic downtown, Deutsche Bank is now raising eyebrows by forecasting a much bigger recession than previously expected.
"We will get a major recession," Deutsche Bank economists said in a report to clients. "We regard it as highly likely that the Fed will have to step on the brakes even more firmly, and a deep recession will be needed to bring inflation to heel."
Deutsche Bank economists believe it will sadly take a considerable amount of time to return to the long-term inflation target of 2%. That means the Federal Reserve could be forced to hike interest rates even quicker to curb inflation to a more satisfactory number.
For context, a recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters. "Recessions are characterized by a rash of business failures and often bank failures, slow or negative growth in production, and elevated unemployment," per Investopedia.
The rationale behind the prediction of a major recession by Deutsche Bank is that inflation will remain "persistently elevated for longer than generally anticipated." Several trends, according to the bank, will contribute to higher-than-expected inflation, including the reversal of globalization and supply-chain disruptions in Asia.
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