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“We no longer see the Fed achieving a soft landing. Instead, we anticipate that a more aggressive tightening of monetary policy will push the economy into a recession,” Deutsche Bank economists led by Matthew Luzzetti wrote in the report.
Inflationary pressures have broadened out, raising concern that the Fed will have to rapidly raise interest rates to get prices under control. Deutsche Bank pointed to how energy and food commodity prices have spiked since Russia invaded Ukraine.
“It is now clear that price stability…is likely to only be achieved through a restrictive monetary policy stance that meaningfully dents demand,” the Deutsche Bank economists wrote.
In other words, the Fed can’t just tap the brakes on the economy. It needs to really slow the economy down.
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