Deutsche Bank has issued a warning for the US, saying its economy is headed for recession in 2023.
The Federal Reserve raised interest rates by a quarter percentage point in mid-March, and said it plans to raise interest six more times by the end of the year. According to Business Insider, Deutsche Bank has become the first major bank to warn the result could be a recession.
“A mild recession will be needed to take sufficient steam out of the economy and labor market to bring inflation back down,” wrote the bank’s analysts
The measurement Deutsche Bank is using is the yields on government bonds. Yields on 2-year Treasury notes have surpassed yields on 10-year notes a number of times over the last week.
“Every time the 10-year-2-year Treasury yield curve has gone negative, recession has followed roughly within a year or two,” Deutsche Bank’s chief US economist Matthew Luzzetti wrote.
The US economy, along with the rest of the world, is still recovering from the pandemic. A recession could significantly impact that recovery.