Economy

The ECB continues to focus on lagging indicators and risks once again to cause a policy error that unduly hurts European growth. What does it mean for investors?

Although our take has not changed yet, the immediate emergence of a second wave of banking system stresses poses a new threat to our constructive near-term economic and market views and will have to be monitored carefully.

If the recession begins this year, it is unlikely to be mild, because inflation will not have fallen by enough to allow the Fed to cut rates aggressively. In contrast, if the recession starts in 2024 or later, when inflation is likely to be much lower, the Fed will be able to cushion the blow. Our base case remains a 2024 recession but the risks around that view have increased in light of recent banking stresses.