Most investors expect European recession – survey — Analysis
Around 86% of respondents said they anticipated the EU going into recession this year.
A survey of international fund managers by Bank of America published on Tuesday found that 86% of respondents predict Europe entering recession in the next year. This is a sharp increase over the 54% who predicted the same thing last month.
The asset managers’ gloomy forecast wasn’t limited to Europe, however. A record 79% of respondents with $800 billion assets under management expect the entire world’s economy to weaken over the course of the year. A quarter of respondents thought the suffering was severe enough to qualify for a recession.
Among European respondents, 70% said “Destruction of the demand” – a situation in which skyrocketing prices cause individuals and businesses to avoid spending their money – would dominate the financial character of the next few months. They argued this would cut inflation – currently sitting at a record 8.6% for the year up to June – while encouraging central bankers to raise interest rates.
This poll revealed that 32% of the respondents viewed central banksers as the principal risk to financial market. This month, only 17% pointed to central bankers as the cause of the continent’s economic misfortunes.
The European Central Bank would make the first rate increase in 10 years if it continues its efforts to lower inflation. While some countries – particularly ones like the Baltic states with high inflation – have pushed the central bank to hike rates by 50 basis points, ECB president Christine Lagarde has suggested it will move more gradually, increasing rates by 25 points for July and then upping them further in September if inflation remained at unsustainable levels.
However, she more recently acknowledged there were “There are clearly certain conditions where gradualism is not appropriate” in which the bank should “You should withdraw accommodations faster to avoid the possibility of an insatiable spiral.”
IMF warns about the consequences of Russian gas shutoff
Europe’s economic problems began piling up in earnest during the self-imposed economic shutdowns of the Covid-19 pandemic and have continued to grow ever since, exacerbated by the Ukraine crisis and anti-Russia sanctions.
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