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Wednesday, October 5, 2022

US will be able to control inflation due to increase in rates… Europe’s condition is worse

inflation Headaches are brewing on both sides of the Atlantic. According to many experts, the rate hike, which has been of late, is trying to curb prices not seen in decades. but here Substantial difference between the United States and Europe.

With the rate hike, the aim is to slow consumption, so that prices fall. This makes sense in the United States, where consumption accounts for 70% of its economy, but not in Europe, where growth in the CPI is driven by the supply side, not the demand side, explains Antonio Castello, a market expert. Huh. From iBroker.

Meanwhile, the prospects of a recession in Europe continue to grow; Goldman Sachs continues to lower expectations of the European economy:

for the recession Global Economyis added, in the case of Europe, energy crisis, another factor not affecting the United States. Gas prices will continue to rise, given that as a result of Russia’s gas pipeline cuts, it will now have to be accessed via other means of transportation, raising the final price of natural gas. “Russian gas can be replaced, not completely, but a little, with gas from elsewhere (…) and this makes it more expensive,” says the expert.

Europe has a problem besides gas with oil prices. “At the time China completely deregulates its population and its production centers, the demand for oil is going to increase,” which will increase demand for crude and raise prices again. “Maybe I don’t see it going down to $120 a barrel, but I also don’t see it going down to $75-80 a barrel, so that would be a very high point.” This will also affect the margins of companies and consumers.

Deutsche Bank cuts its GDP expectations for the euro area next year, from -0.3% estimated in July to -2.2%; The risk is heightened by the rise in wages and the weakness of the euro. But also for European locomotives, Germany, which could suffer from particularly Russian power cuts. The unit expects Germany to experience GDP growth of -3.5% in 2023, the third worst year since World War II, after only 2009 and 2020. An even deeper recession cannot be ruled out in colder conditions than in normal weather.

One image that also shows bearishness is that the broad German yield curve inverted for the first time since 2008, The inversion of the curve usually predicts a recession:

Therefore, the panorama is very complex in Europe; The economic cycle in the United States has nothing to do with European The economy in the United States is very strong”, explains Antonio Castello, who predicts some difficult months for the economy of the old continent.

World Nation News Desk
World Nation News Deskhttps://worldnationnews.com/
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