Deutsche Bank Issues Shocking Forecast of “Major” US Recession

On the heels of its surprising prediction of a “mild” recession for the U.S. economy earlier this month, Deutsche Bank now forecasts a “major recession” is on the horizon. This marks the first major Wall Street institution to foresee this drastic of an economic downturn.

First it was COVID-19 lockdowns, restrictions, masking, injections, etc. Then came four-decade high inflation that shows no signs of abating. And now predictions for the Great Recession 2.0.

The financial institution believes that, even though inflation may have now peaked, bringing it back down to the Federal Reserve’s stated goal of 2% will take aggressive interest rate hikes over a long period. This, Deutsche Bank says, means the Fed is very likely “to step on the brakes even more firmly, and a deep recession will be needed to bring inflation to heel.”

Analysts do not believe the central bank can achieve the so-called “soft landing,” but instead will trigger an economic downturn that could take years to recover from. The bank’s report is grimly titled, “Why the coming recession will be worse than expected.”

Deutsche Bank researchers list several reasons for the pessimistic outlook. Inflation continues to soar to four-decade highs, the Ukraine war strengthens an already-begun reversal in globalization, wages are likely to continue rising, and both sellers and buyers are accepting cost and price increases.

Analysis of similar economic periods by the bank shows that the Fed is far behind in responding to soaring inflation than it has been before. Noting the central bank “has never been able to correct” rampant inflation and near full employment, analysts believe that something much deeper than merely a “mild recession” is needed to cool skyrocketing prices.

Even financial institutions that are not so pessimistic, such as Goldman Sachs, declare it will be “very challenging” for the Fed to rein in soaring inflation and wage growth.

Economists fear that the Fed waited too long to address spiking inflation and its coming moves to rein in high prices. Economics, like physics, has basic principles that are provable and predictable, such as flooding the economy with easy money along with hiking wages brings higher prices. Any freshman Econ student knows this.