The US economy will enter a recession next year amid higher Federal Reserve (Fed) rates, Deutsche Bank economists David Folkerts-Landau and Peter Hooper believe.
“The US economy will take a big hit from additional Fed tightening in late 2023 and early 2024,” analysts said in a report titled Over the Brink.
In their opinion, the Fed will raise the key rate by 0.5 percentage points at the next three meetings, and by mid-2023 the rate will exceed 3.5%. The current target range for the federal funds rate is 0.25-0.5%.
In addition, by the end of next year, the Fed will reduce the amount of assets on its balance sheet by almost $2 trillion from the current $8.9 trillion, Deutsche Bank experts predict. For monetary policy, this is equivalent to another 3-4 rate hikes of 0.25 percentage points, Bloomberg quotes economists.
Deutsche Bank predicts that by the summer of 2023 the US stock market will fall by 20%, and the yield on 10-year US government bonds will rise to 3.3% at the end of this year. Unemployment in the United States in 2024 will jump to 4.9% from 3.6% in March, economists expect.
“Our forecast for a recession in the US next year so far differs sharply from the consensus,” the authors of the report admit. “But we believe that this will soon change.”
Earlier this week, Ukraine repaid early a short-term loan from Deutsche Bank AG London in the amount of about $350 million, attracted at the end of last year, a source in the market has told Interfax-Ukraine.
According to the source, taking into account interest, the payment reached some $354 million.
Interfax-Ukraine could not immediately reach the Ministry of Finance for confirmation of the information.
As reported, according to government resolution No. 1291 dated December 23, 2020, this is a bridge loan taken for up to six months at a rate of up to three-month LIBOR + 5.75%, which can be repaid ahead of schedule in the event of a change in the market price of Ukraine’s eurobonds or new issue on the terms determined by the loan agreement.
Early 2021, the Ministry of Finance said that in the last days of 2020 it attracted a short-term $340.7 million loan from Deutsche Bank. According to the ministry’s statistics, in December 2020, Ukraine’s debt to this creditor increased by $372.6 million, to $1.313 billion, and by the end of February 2021 it decreased to $1.272 billion.
The fall of the Ukrainian economy in 2020 may amount to 5.5% of GDP with a further recovery of growth by 3.5-4% in the next two years, analysts at Deutsche Bank expect.
According to the materials of Emerging Markets Outlook 2021, experts admit that the next tranche of the International Monetary Fund (IMF) will be allocated to Ukraine in early 2021, which will pave the way for obtaining funding from other international partners.
At the same time, the central bank will leave the discount rate at 6% per annum, according to the review.
