Analyst: ‘These economies are heading for recession’

Now that central banks have raised interest rates, fears of a recession are mounting. Rob Subaraman, an economist at Nomura Securities, expects several countries to enter a recession in the next 12 months.

Sky-high inflation is forcing central banks to put their feet on the brakes. By systematically raising interest rates, they ensure that less money flows into the economy. Higher interest rates make it interesting for companies, governments, and families to take on debt.

Recession risk

In any case, regulators face a formidable challenge. After all, a rapid transformation can have negative consequences for economic growth. Even some experts do not rule out a recession. According to Subaraman, many economies will face a recession in the next 12 months.

Central banks are doing everything they can to fight inflation. They also want to maintain their credibility, which is why they are now acting aggressively †In the US, for example, the Federal Reserve raised interest rates by 75 basis points (editor) last month,” the economist noted in an interview with the American news site. CNBC† We have been pointing out for several months that recession looms for many advanced economies.

Subbaraman expects the following regions to enter a recession in the next year and a half: the United States, the eurozone, the United Kingdom (UK), Japan, South Korea, Australia and Canada. I anticipate a US recession in the last quarter of this year. It will last for five quarters.

I would also point out that when many economies are weakening, you cannot rely on exports for growth. This is another reason why we believe that this recession risk is real and likely to happen.”

Catch

“Central banks all over the world have had loose fiscal policies for a very long time,” he continues. Many of them were convinced that the devaluation was only temporary. Now they have to catch up and try to bring the inflation story back under control.”

According to the economist, the Fed will also raise interest rates by 75 basis points in July. “At the next meeting, the regulator is likely to choose a 50 basis point increase. After that, we believe the preference is a 25 basis point adjustment to finally reach a rate of 3.75% in February.” There is an urgent need for such interventions. It will hurt the economy much more if inflation remains high.”

Anyway, we have to persevere. It is better for the global economy and society to endure this pain and reduce inflation than to let inflation get out of control, as we learned in the 1970s,” concludes the economist.

(Javed)