Investment bank MPS Capital Services warned that the U.S. economy will slip into recession by year-end. The firm’s strategists predicted that the Federal Reserve will raise interest rates another 25 basis points and warned that the central bank’s monetary tightening will “drag on the economy.”
“Strategists Forecast Recession and Rate Hike
Bloomberg reported Thursday that Luca Mannucci, head of market strategy at MPS Capital Services, warned that the U.S. will be dragged into a recession by the end of the year, with the U.S. dollar plunging 5% against other currencies later this year.
MPS Capital Services is an Italian corporate and investment bank and part of a banking group that includes Banca Monte dei Paschi di Siena SpA. Strategists are quoted as saying:
Recession is expected in the U.S. by the end of the year…tightening monetary policy will be a drag on the economy.
Mannucci expects the Federal Reserve to raise interest rates by another 25 basis points and the European Central Bank (ECB) by at least two quarter points.
He told us that he expects a Federal Reserve rate hike to depreciate the U.S. dollar against the euro by about 3% in the coming months, noting that the Bloomberg Dollar Spot Index has already fallen 1.6% this year and is down about 10% from its record high in September. He also noted that.
The MPS strategist further warned that, along with the problems faced by Credit Suisse, the failure of several U.S. regional banks could lead to worsening credit conditions and hurt the economy.
Many are predicting a U.S. recession. Neel Kashkari, president of the Federal Reserve Bank of Minneapolis, said the current banking crisis has brought the U.S. economy closer to recession. Economist David Rosenberg warns that the U.S. economy has “crash landed” and a recession is imminent. Gold bug Peter Schiff warns that the U.S. will face a “much more severe recession” than the financial crisis and the Fed’s perception. Meanwhile, billionaire “bond king” Jeffrey Gundlach foresees “painful consequences” in the next recession.
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