Inflation and recession: Things will get worse before getting better

4.25% rate expected

Our lived experience of the past few years has reminded us predicting is hard, and the failure of forecasters’ imagination is laid bare at each unexpected turn of events.

We think about the complex interplay of macroeconomics, geopolitics, and policy with a humble mindset, and have come away with a growing conviction the global economy will fare much worse for the remainder of the year and into next year - culminating in a global recessionary environment - before things can possibly get better. Looking to the US economy and starting with inflation, we expect the persistence and potency of core services prices - especially in shelter categories - will compel the Federal Reserve to raise its target rate to 4.25% by year-end, with risks skewed to a slightly ...