Morgan Stanley predicts a recession in the eurozone in the last quarter

Morgan Stanley economists said they now expect the euro zone to slip into a mild recession in the fourth quarter of this year amid a reduction in energy supplies from Russia.

In a report released Wednesday, economists including Jens Eisenschmidt wrote that the economy would contract for two quarters before resuming growth in the second quarter of next year, driven by increased investment.

They changed their forecast amid the likelihood of a reduction in natural gas flows from Russia to Europe and as consumer and business spirit declines, along with persistently high inflation. 

"The risks associated with the outlook have increased," Eisenschmidt and his colleagues write. 

Despite the slowdown, they said that with inflation so high, they still expect the European Central Bank to raise the deposit rate at every meeting this year to 0.75% in December, although they acknowledged that it could stop the hike after September if the outlook worsens.