What You Need to Know

The global economic outlook deteriorated sharply in the second quarter and markets are increasingly concerned that higher rates will lead to a recession. This outcome isn’t a certainty, but the probability of slower or negative growth has increased materially as inflation has stayed high.

Key Forecast Trends

  • We have upgraded inflation forecasts—and downgraded growth—and now expect global GDP to expand at a rate well below potential in 2023.
  • Regardless of whether the economic slowdown meets the technical definition of a recession, the next few quarters aren’t going to feel good.
  • Although we believe that there is still a path to a soft landing, we think the path gets narrower with each passing month of high inflation.
  • Once inflation moderates—which we expect eventually—central banks can worry more about growth, as long as inflation expectations remain anchored.

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The views expressed herein do not constitute research, investment advice, or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams.

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