Citigroup Inc (C.N) Chief Executive Jane Fraser said on June 3 that Europe was more likely to fall into a recession than the United States, as she met other global bank CEOs this week to caution about the health of the global economy.
Fraser, head of the third-biggest and most globally-focused U.S. bank, recently got back from a world tour with stops in Europe, Asia, and the Middle East, where she said her conversations centered on “the three Rs.”
“It’s rates, it’s Russia and it’s recession,” Fraser said, speaking at an investor summit in New York.
However, Fraser said in Europe:
“The energy side was really having an impact on a number of companies in certain industries that are not even competitive right now. Because of the cost of electricity and the cost of energy, some of them are shutting down operations. So Europe definitely felt more likely to be heading into a recession than you see in the U.S.”
In the United States, Fraser said the question is more about interest rates than recession. She added:
“It’s certainly not our base case that it will be, but it’s not easy to avoid either.”
On June 1, Jamie Dimon JPMorgan & Chase Co’s (JPM.N) Chairman and Chief Executive related the challenges encountered by the U.S. economy to a “hurricane,” while John Waldron Goldman Sachs (GS.N) President and Chief Operating Officer said on Thursday that the current economic turmoil is one of the most difficult he has ever dealt with.
Tesla Inc (TSLA.O) CEO Elon Musk added to the gloomy sentiment, saying he has a “super bad feeling” about the economy and needs to dismiss about 10% of employees at the electric carmaker, in a message sent on Thursday titled “pause all hiring worldwide.”
However, Cleveland Federal Reserve Bank President Loretta Mester told CNBC on June 3 that she doesn’t expect a “hurricane” in the future, but “we have to realize that the risks of recession have gone up.”
Major central banks, already planning interest rate increases in a battle against inflation, are also arranging a common pullback from major financial markets in a first-ever round of global quantitative tightening predicted to limit credit and increase stress on an already-contracting world economy.
Fraser commented while citing the European Central Bank:
“It feels like the ECB is a few months behind where the Fed has been in getting its arms around inflation and without quite the same flexibility that the U.S. has.”
The U.S. job market remained robust in May, data on Friday showed, with employers hiring more staff than expected and sustaining a fairly booming pace of wage hikes. U.S. stock indexes plunged on Friday as the steady jobs report backed the view that the Federal Reserve would stay on its hawkish policy tightening path to tackle decades-high inflation.
“When we look at what the clients are talking to us about from a macro perspective, I think the confidence is still pretty good amongst the CEOs and the CFOs.”
She said that she also expects U.S. equity markets to go into a period of less volatility and for the Chinese government to initiate a new round of fiscal stimulus in the months to come, as that country starts to recover from COVID-19 pandemic-related lockdowns.
In China, Fraser said she “wouldn’t be surprised to see action taken on fiscal stimulus.”