City CEO Jane Fraser is confident that Europe will fall into a recession

Citigroup CEO Jane Fraser told CNBC he was convinced that Europe was heading for a recession.

Speaking at the World Economic Forum on Monday, Fraser said the combination of various factors, including the Ukraine war and the resulting energy crisis, has put Europe at risk of a significant recession and even other parts of the world are showing some signs of resilience.

He told Geoff Cutmore, “Europe is in the midst of a crisis from the supply chain, from the energy crisis to the storms, and obviously some of the atrocities that are happening in Ukraine.”

These factors have convinced him that if Europe were to face a recession, Fraser said: “Yes.”

European energy spending has risen in recent months amid Russian sanctions, while a broader rise in inflation is exacerbating the cost of living crisis.

Wall Street did not give a timeline for the major recession. However, his predictions of a “cruel winter” for the market in October 2021 proved to be largely correct, the stock markets started a big sell-off in early 2022 and the amount of losses has expanded to this day.

The United States, which has so far shown “greater resilience” in the economy, labor market and consumers, could still go into recession, Fraser said. Still, much of inflation depends on how the Federal Reserve manages its rate hiking strategy.

“There’s some buffer,” he said. “We need to see if it is used wisely.”

Asia, meanwhile, is recovering well from the Kovid-19 epidemic and showing a “feeling of optimism.”

City CEO Jane Fraser says she is confident that Europe will fall into recession because of the effects of the war in Ukraine and the resulting energy crisis.

Patrick T. Fallon | AFP | Getty Images

Fraser was speaking at a panel entitled “Global Economic Outlook”, which was attended by Franোয়াois Villarre de Galhau, Governor of the Central Bank of France and Policymaker of the European Central Bank.

Villarreal de Galhousie said he would “disagree” with Fraser’s forecast for the European economy, instead describing it as “resilient”.

“The main problem, at least in the short term, is inflation,” he said. “That’s why we need to normalize monetary policy.”

On Friday, the ECB gave its strongest indication that it would soon begin raising interest rates – possibly in July – with market players now pointing to at least four rate hikes before the end of the year.

The ECB has long been resistant to rate hikes, insisting that price pressures will ease in the second half of the year.

Eurozone inflation hit a record high for the sixth consecutive month in April as the ongoing war in Ukraine and the subsequent impact of Europe’s energy supply hit the region’s economy.

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