The News Radar

Timely links to external news and articles, usually valuation related, with occasional commentary.


Originally posted Tuesday, 26 April 2022
Deutsche Bank Sees 5%-6% Fed Target Rate and Deep U.S. Recession

“We assume conservatively that a Fed funds rate moving well into the 5% to 6% range will be sufficient to do the job this time,” the authors including David Folkerts-Landau, group chief economist and head of research, wrote in a report Tuesday. “This is partly because the monetary-tightening process will be bolstered by Fed balance-sheet reduction, which our U.S. economics team estimates will be equivalent to a couple additional 25 basis-point rate hikes.”

...

This monetary tightening and the financial upheaval that accompanies it “will push the economy into a significant recession by late next year,” Folkerts-Landau said.

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The Deutsche economists -- by their own admission -- are much more pessimistic than most other major forecasters. Goldman Sachs Group Inc. estimated chances of a contraction at about 35% over the next two years. Bloomberg Economics’ recession-probability model has estimated a 44% chance of recession happening before January 2024.

I'm usually no fan of DB but think they're getting this closer than the consensus.