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Our views 02 June 2023

Yes, we could still see recessions - Investment Clock economic update

30 minute read

Despite more rate hikes, recessions look a lower risk than just a few months ago. Bank lending conditions have tightened, but not as much as feared.

The peak impact of rate hikes may even already be behind us in some major economies. Developed economy business surveys look more consistent with robust positive activity growth than recession. But, if lags of monetary policy really are longer than usual and bank lending conditions continue to tighten, recessions in some major economies can’t be ruled out.

Beneath headline level, inflation looks stubbornly sticky; more resilient than expected inflation would bring higher rates for longer and potentially delayed but deeper recessions. For now, modest technical recessions still look a reasonable probability for the next 12 months in some developed economies.

Read in full: Yes, we could still see recessions

The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.