Tuesday, November 29, 2022

ECB Chair Makes U-turn on Initial Recession Prediction

The president of the European Central Bank (ECB), Christine Lagarde has gone back on her July prediction that a global recession will not happen in 2022 or 2023. This means that, as global economies continue to work their ways around the prevalent inflation, they also have an impending recession to deal with.

According to the bank, the ongoing measures being implemented by global economies make it even more likely that a recession occurs in 2023. More so, companies are also seeing the demand for their products dwindling significantly.

Lagarde predicts recession while the U.S Fed allays fears

Speaking at the Economic and Monetary Affairs Committee of the European Parliament earlier, Lagarde explained her new forecast in detail. She said, firstly, the last quarter of the year is expected to end in the negative, albeit economy-wise. And a similar outlook is also expected for the first quarter of 2023.

Lagarde then noted that when two quarters are consecutively in the negative like that, technically, a recession is in progress.

Interestingly, however, the United States has already had two consecutive negative quarters in terms of GDP. But the Fed insists that a recession is not playing out just yet. 

Nonetheless, Lagarde will be hoping to check the current inflation levels in Europe, just as seen in the United States. According to her, the ECB will continue to hike interest rates for its next several meetings.

Will the economy impact crypto?

For a long time, the global economy is known to affect the crypto market. How it does this is that when there is inflation, economies engage in quantitative tightening, which is usually achieved by increasing interest rates. When that happens, however, both the stock market and the crypto market suffer. That is because it becomes a lot more difficult to invest in speculative, high-risk assets like cryptocurrency during that period.

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