Joachim Fels does not hide his pessimism. The economic adviser to Pimco, the largest fixed income manager in the world, believes growth in Europe and the US will plummet in the coming months. “We are in fact already in stagflation and enter recession”he said in an interview with World. The German, who lives in California and was in London, sits on Pimco’s investment committee on Friday 8 July. As such, he must lead the approximately $ 2 trillion worth of assets (1.960 billion euros) of this asset management behemoth. It concerns seven times more than the French state budget.

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Its main task is to detect trends in the coming years. What he finds is certainly not reassuring. In the short term, inflation – and the monetary tightening that accompanies it – explains the violent brake on Western growth. The sequence of events is now known: at the end of the Covid-19 pandemic, supply chains became completely disorganized, creating scarcity of goods (electronic chips, in particular) and higher prices.

To this first shock was added the war in Ukraine, which caused a surge in raw materials (oil, gas, agricultural products, etc.). To deal with this surge in inflation, central banks, starting with the US Federal Reserve (Fed), are raising rates. “We are at 8.6% inflation in the US and the euro zone, which is very far from the 2% target of central banks. They have no choice but to tighten their monetary policy.believes Mr. Fels. The Fed has already raised rates from near zero at the beginning of the year to a range of 1.5% to 1.75%.

Most advanced cycle in the United States

“It should double them again by early 2023, according to Mr. Fels. Normally, the Fed has a dual mandate, controlling inflation and supporting employment. Currently, it only focuses on inflation. “ Rightly, he points out, because the risks of entering a regime of lasting high inflation are real, and it is better to act as soon as possible to stem. Inevitably, this cocktail – falling purchasing power and tightening financial conditions – causes the economy to collapse.

“It’s a recession caused by [Jerome] Powell and [Vladimir] cheese fries “, summarizes Fels, referring to the presidents of the Fed and Russia. The United States is the most advanced in the economic cycle: the gross domestic product was already negative in the first quarter e “current indicators point to a negative figure in the second quarter”. In the euro zone, the recession will come later in the year. In the first quarter, growth was still positive, at 0.6%.

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