Nomura Says that the US will tip into a long recession this year

The Federal Reserve's interest-rate hikes will send the United States into a mild but prolonged recession this year, causing the economy to contract in 2023, according to investment bank Nomura.

According to Nomura, the US GDP will begin to contract in the fourth quarter of this year, followed by six more quarters of negative growth.

It predicted that the US economy would grow by only 1.8 percent in 2022 before contracting by 1 percent in 2023. According to the bank, unemployment will rise from 3.6 percent to more than 5 percent by the end of 2023, and nearly 6 percent by 2024.

Last week, the Fed raised interest rates by 75 basis points, or 0.75 percentage points, the largest increase since 1994. Inflation in May was 8.6 percent year on year, the highest reading in 41 years, according to data released less than a week ago.

Nomura economists Aichi Amemiya and Robert Dent wrote in a note Monday that the Fed would have to raise interest rates more than previously expected, which would be bad for growth.

According to the bank's analysts, the Fed will raise interest rates to around 3.4 percent by the end of the year, then raise them to a peak of between 3.5 percent and 3.75 percent in 2023 before cutting them as growth slows. The Federal Reserve's target range is 1.5 percent to 1.75 percent.