London Daily

Focus on the big picture.
Wednesday, Sep 03, 2025

Deutsche Bank Predicts U.S. Recession in ‘23 as Fed Boosts Rates

Deutsche Bank Predicts U.S. Recession in ‘23 as Fed Boosts Rates

The U.S. will tumble into a recession next year as the Federal Reserve jacks up interest rates to combat high and widening inflation, Deutsche Bank economists David Folkerts-Landau and Peter Hooper said in a report on Tuesday.
Less than a month after saying the U.S. would experience a “mild” recession, Deutsche Bank has doubled down, saying the recession will be worse than it previously imagined.

In the latest edition of “What’s in the tails?” Deutsche Bank Research economists David Folkerts-Landau, Peter Hooper and Jim Reid wrote how Fed Funds and the ECB rate may have to go higher than the consensus believes and that, as a consequence, the upcoming recession could be more severe than even sceptics believe.

The bank now expects “a major recession” in late 2023 to early 2024, according to a Tuesday note to investors titled “Why the coming recession will be worse than expected.” Although the bank predicts the economy could pick up in mid-2024, things will get worse before they get better, according to the report.

The bank had previously raised eyebrows in early April as the first major bank to predict a recession would hit the U.S. by late next year. The Tuesday report, written by a team led by Deutsche Bank’s chief economist and head of research David Folkerts-Landau, questions why other major banks maintain rosier projections for the U.S. economy.

“I am very surprised we are the extreme outlier on the street,” Folkerts-Landau writes in the report. “Given the macro starting point, my view is that the burden of proof should be on why this boom/bust cycle won’t end in a recession.”

In a report on April 5, the bank said that the country would enter a “mild” recession late next year because of a number of factors, of which rising inflation was the most important.

The only way to minimize the detrimental impact of prolonged inflation is “to err on the side of doing too much,” which means the Fed must rapidly increase interest rates, Folkerts-Landau wrote in the Tuesday report.

Deutsche Bank is among the most bearish of the major banks when it comes to its recession prediction. Goldman Sachs put the odds of a recession within the next two years at 35% while Morgan Stanley’s chief investment officer wrote last month that her team was “far from calling a U.S. recession.”

Inflation has plagued the U.S. economy since last year, most recently hitting a four-decade high of ​​8.5% last month compared to a year ago after hitting 7.9% in February, according to the U.S. Bureau of Labor Statistics’ April report on the consumer price index. For six straight months, inflation has been higher than the Federal Reserve’s 6% target—its ultimate goal is 2%. But the Fed has tried to combat surging prices by raising interest rates. The central bank raised rates in March, and Fed Chairman Jerome Powell said last week that a half-point increase in rates was “on the table” for next month.

Although the Fed is attempting to tackle inflation, Deutsche writes in the report that the central bank has never before been able to correct course even when it missed its employment objectives or inflation goals by smaller margins.

“The Fed has been slow to catch up with these developments and finds itself both well behind the curve and with less leverage than in the past to deal with the problem,” the report states.
Newsletter

Related Articles

0:00
0:00
Close
Google Avoids Break-Up in U.S. Antitrust Case as Stocks Rise
Couple celebrates 80th wedding anniversary at assisted living facility in Lancaster
Information Warfare in the Age of AI: How Language Models Become Targets and Tools
The White House on LinkedIn Has Changed Their Profile Picture to Donald Trump
"Insulted the Prophet Muhammad": Woman Burned Alive by Angry Mob in Niger State, Nigeria
Trump Responds to Death Rumors – Announces 'Missile City'
Court of Appeal Allows Asylum Seekers to Remain at Essex Hotel Amid Local Tax Boycott Threats
Germany in Turmoil: Ukrainian Teenage Girl Pushed to Death by Illegal Iraqi Migrant
United Krack down on human rights: Graham Linehan Arrested at Heathrow Over Three X Posts, Hospitalised, Released on Bail with Posting Ban
Asian and Middle Eastern Investors Avoid US Markets
Ray Dalio Warns of US Shift to Autocracy
Eurozone Inflation Rises to 2.1% in August
Russia and China Sign New Gas Pipeline Deal
China's Robotics Industry Fuels Export Surge
Suntory Chairman Resigns After Police Probe
Gold Price Hits New All-Time Record
Von der Leyen's Plane Hit by Suspected Russian GPS Interference in an Incident Believed to Be Caused by Russia or by Pro-Peace or by Anti-Corruption European Activists
UK Fintechs Explore Buying US Banks
Greece Suspends 5% of Schools as Birth Rate Drops
Apollo to Launch $5 Billion Sports Investment Vehicle
Bolsonaro Trial Nears Close Amid US-Brazil Tension
European Banks Push for Lower Cross-Border Barriers
Poland's Offshore Wind Sector Attracts Investors
Nvidia Reveals: Two Mystery Customers Account for About 40% of Revenue
Woody Allen: "I Would Be Happy to Direct Trump Again in a Film"
Pickles are the latest craze among Generation Z in the United States.
Deadline Day Delivers Record £125m Isak Move and Donnarumma to City
Nestlé Removes CEO Laurent Freixe Following Undisclosed Relationship with Subordinate
Giuliani Seriously Injured in Accident – Trump to Award Him the Presidential Medal of Freedom
EU is getting aggressive: Four AfD Candidates Die Unexpectedly Ahead of North Rhine-Westphalia Local Elections
Lula and Putin Hold Strategic BRICS Discussions Ahead of Trump–Putin Summit
WhatsApp is rolling out a feature that looks a lot like Telegram.
Investigations Reveal Rise in ‘Sex-for-Rent’ Listings Across Canada Exploiting Vulnerable Tenants
Chinese and Indian Leaders Pursue Amity Amid Global Shifts
European Union Plans for Ukraine Deployment
ECB Warns Against Inflation Complacency
Concerns Over North Cyprus Casino Development
Shipping Companies Look Beyond Chinese Finance
Rural Exodus Fueling European Wildfires
China Hosts Major Security Meeting
Chinese Police Successfully Recover Family's Savings from Livestream Purchases
Germany Marks a Decade Since Migrant Wave with Divisions, Success Stories, and Political Shifts
Liverpool Defeat Arsenal 1–0 with Szoboszlai Free-Kick to Stay Top of Premier League
Prince Harry and King Charles to Meet in First Reunion After 20 Months
Chinese Stock Market Rally Fueled by Domestic Investors
Israeli Airstrike in Yemen Kills Houthi Prime Minister
Ukrainian Nationalist Politician Andriy Parubiy Assassinated in Lviv
Corporate America Cuts Middle Management as Bosses Take On Triple the Workload
Parents Sue OpenAI After Teen’s Death, Alleging ChatGPT Encouraged Suicide
Amazon Faces Lawsuit Over 'Buy' Label on Digital Streaming Content
×