Recession latest publications
This report presents an analysis of those global shocks, mostly of low probability, which may have a severe impact on the economy. Short-term risks have diminished on the back of easing trade tensions and interest rate cuts, but concerns on structural issues remain high (de-globalization and climate change).
The paper presents a quasi-historiographical or “narrative” analysis of the most critical developments occurring prior to and through the last nine recessions in light of Minsky’s theory of financial instability.
Probability of recession in 12 months at one-year lows (30%). Financial conditions remain solid after Fed “mid-cycle” adjustment. Strong household finances supporting consumption.
Models suggest 70% probability of recession within 24 months. Increased weakness in global growth. Policy uncertainty whipsawing with trade tensions. At times, key financial markets showing signs of panic-like conditions.
A possible recession in the US economy has led to a change in the language and direction of the monetary policy of major central banks around the world. The signals emitted by the global economy produced a risk scenario that was reflected in the purchase of safe-haven assets.
Baseline growth forecast unchanged, but risks tilted to downside. Model-based recession projections suggest probability around 75% over the next 24-months. Mixed signals from labor market indicators. Downside risks to inflation moderating.
This report presents an analysis of those global shocks, most of low probability, which may have severe effects on the economy. The balance of risks continues to be tilted to the downside due to trade tensions (impact on China) and increasing probability of recession in the US.
Just as current medicine cannot predict exactly when someone will suffer a stroke or cancer, economic science cannot predict precisely when the next recession, financial crisis or sovereign default will occur.