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Brussels, Oct. 3 (Xinhua) -- Kang Yi Against the U.S. federal reserve to take since the beginning of the year last hike radical, a number of European economists, an interview with Xinhua News Agency said that the strain energy supplies, such as high inflation has made the European economy under pressure, the fed's aggressive rate hikes will from three aspects as capital flows, exchange rates and inflation intensifies the predicament.

James Knightley, chief international economist at ING, told reporters that the risk of a US recession was rising as the Federal Reserve continued to raise interest rates aggressively at all costs to control inflation. But Europe, Mired in an energy crisis and high inflation, has a bleaker economic outlook than the United States.

Mr Knightley said the EU, which had run a trade surplus for years, had continued to run a deficit this year because of a surge in the cost of energy imports. The US dollar exchange rate has been boosted by a number of factors, including the US Federal Reserve's continued sharp interest rate increase, the European economy facing more downward pressure, and changes in the EU's trade structure, which has had a significant impact on capital flows between Europe and the US.

As the Fed continues to raise rates, the ECB will be forced to follow suit, notes Jacques Perkermans, a research fellow at the Centre for European Policy Studies. But in the short term, money seeking short-term interest returns will sell euros and buy dollars, weighing on the euro's exchange rate.

Philipp Rausberg, a policy analyst at the European Policy Centre, another think-tank, says the Fed is raising rates much more aggressively than the ECB, which could cause the euro to fall further against the dollar. Widening interest rate differentials between the US and Europe make dollar assets more attractive and will continue to drive investors out of euros and into dollar holdings, further weakening the euro.

Mr Rausberg also said that as the dollar strengthened, imports to the EU, particularly the huge volume of key raw materials denominated in dollars, would become more expensive, which could further push up EU inflation. In response, the European Central Bank may be forced to raise interest rates further, tightening funding conditions. Although the current EU banking system is still relatively resilient, the entire financial system will face huge risks if corporate bankruptcies and debt defaults increase sharply.

Daniel Gros, director of the Center for European Policy Studies, says if the ECB tightens policy further and the crisis in Ukraine escalates further, it could bring more financial turmoil to Europe.