An investment bank has warned that the U.S. economy could be in a recession by the end of this year. The firm’s economist believes that the Federal Reserve’s monetary tightening will have a negative impact on the U.S. economy.
Economist’s Recession and Rate Hike Predictions
Luca Mannucci, head of Market Strategy at MPS Capital Services, has said that the U.S. is likely to experience a recession by the end of 2019. The Italian corporate and investment bank’s economist also predicted that the U.S. dollar will plunge as much as 5% against other currencies in the second half of this year, according to a Bloomberg report published Thursday.
Mannucci said:
We anticipate the recession in the U.S. by year-end … The tightening of the monetary policy will drag down on the economy.
The strategist believes that the Federal Reserve will raise interest rates by an additional 25 basis points, while the European Central Bank (ECB) is predicted to increase rates by a minimum of two quarter-points. He added that the U.S. dollar is expected to depreciate by around 3% against the euro in the upcoming months because of the Federal Reserve’s interest rate hikes.
The Bloomberg Dollar Spot Index has already dropped 1.6% this year, and it has declined by approximately 10% from September’s record high. In addition, the economist has suggested that the failure of various regional U.S. banks, along with the issues faced by Credit Suisse, may result in tighter credit conditions and hit the economy.
A number of people have made predictions about a possible recession in the U.S. For instance, the president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, has stated that the current banking crisis has moved the U.S. economy closer to a recession. Economist David Rosenberg has warned of a “crash landing” and an imminent recession for the U.S. economy. Peter Schiff, a gold bug, has cautioned that the U.S. will face a financial crisis and a “much more severe recession” than the Fed recognizes. Billionaire “bond king” Jeffrey Gundlach also predicts “painful outcomes” in the next recession.
What do you think about the forecasts by the MPS economist? Let us know in the comments section below.
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