Hike rates

There’s a 50% chance of a global recession as central banks raise rates to curb inflation, bankers say

Moscow still faces the prospect of a default, despite a last-minute payment this week. Getty Images

  • The global economy faces a 50% chance of recession, according to the CEO of Deutsche Bank.
  • The executive also said the chances of a recession in the United States and Europe are higher than the bank’s pre-war Ukraine forecast.
  • Earlier this month, the US Fed imposed its biggest interest rate hike since 1994.
  • For more stories, go to www.BusinessInsider.co.za.

The global economy faces a 50% chance of recession as central banks around the world scramble to fight inflation, Deutsche Bank CEO Christian Sewing said at the Futures Summit on Wednesday. of finance in Frankfurt.

“At least I would say we have a 50% chance of a global recession,” Sewing said. Bloomberg.

For the United States and Europe in particular, he said the chances of a recession for the second half of 2023 are higher compared to the bank’s pre-war Ukraine forecast.

The global economy, Sewing added, faces a host of pressures, including inflation and supply chain issues. He had expected central banks to raise interest rates in response to soaring inflation, but the pace is surprising, he said.

This month, the Federal Reserve imposed its biggest rate hike since 1994, raising its benchmark rate by 75 basis points, as inflation in May rose much warmer than economists expect. This followed earlier rate hikes of 25 and 50 points, and US Fed Chairman Jerome Powell said another 75-point hike was possible next month.

Couture joins other bank chiefs who are sounding the alarm on the economy. Last month, JPMorgan CEO Jamie Dimon warned of a coming economic “hurricane”. Also last month, Well Fargo chief Charlie Scharf said there was ‘no question’ of an economic downturn, with a recession difficult to avoid. And earlier this month, Morgan Stanley CEO James Gorman said there was a 50% chance of a recession, but it was likely to be moderate.

Meanwhile, Citi sees 40% chance of a US recession going into next year. The bank’s head of capital markets, Kristin Bitterly, told CNBC on Tuesday that the Fed’s hawkish moves will take time to settle in and could take up to 18 months before the effects show.

“We have the probability of a recession of around 40% at the start of next year. We would not see that until next year simply because the tightening that we see around the Fed generally takes around 12 to 18 months. to really show up in economic terms,” Bitterly said.

Receive the best of our site by e-mail every day of the week.

Go to the Business Insider homepage for more stories.