Christine Lagarde, president of the European Central Bank, has radically changed her tone on a possible recession. The World Bank has warned that the aggressive monetary policy of the world economies will lead to a recession in 2023. Multinationals are also warning that the slowdown in demand has accelerated.
Christine Lagarde changes tone on recession
In July, Christine Lagarde revealed that there was no forecast of a recession in 2022 or 2023. However, in a speech to the European Parliament’s Economic and Monetary Affairs Committee today, she revealed that 2023 will be a difficult year for the economy. She estimates that the last quarter of 2022 and the first quarter of 2023 will probably be negative.
July Lagarde: No recession forecast this year or next
September Lagarde: OMFG pic.twitter.com/V7uMxkYaWp
– Sven Henrich (@NorthmanTrader) September 26, 2022
Two consecutive quarters of negative GDP growth meet the technical criteria for a recession. In fact, the U.S. has already met this technical test. The White House and the Fed have allayed fears of a recession by pointing to the strength of the labor market and wages. However, when the economic downturn begins to accelerate, the Fed will find it difficult to ignore the possibility of economic catastrophe.
Like the Fed, Christine Lagarde seems unwavering in her stance against inflation. She reveals that the ECB will raise interest rates in upcoming meetings. She points out that wage dynamics remain contained. However, the depreciation of the euro has led to an increase in inflation levels.
How does this affect crypto-currencies?
The crypto-currency market is highly correlated with the broader, general market. As the world’s economies will engage in quantitative tightening, the stock market and the crypto market will crash. Excessive aggression can also tip the economy into a recession.
Bitcoin was created after the last great recession in 2008. The market will pay attention to how the crypto performs during a recession.