In the latest edition of “What’s in the tails?” Deutsche Bank Research economists David Folkerts-Landau, Peter Hooper and Jim Reid discuss 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 storm clouds over the global economy have darkened dramatically. Russia’s invasion of Ukraine has led to fundamental questions about Europe’s dependence on Russian energy and the continent’s geopolitical stability. It has also significantly pushed up commodity prices, exacerbating above-target inflation, and creating a serious risk that longer-term expectations become unanchored. [more]