“The experience of history indicates that disinflation often carries meaningful costs for growth and we see the aggregate probability of recession as now approaching 50%,” the economists wrote. “Central banks may yet engineer the soft – or “softish” – landings embody in their forecasts (and in ours), but this will require supply shocks to ebb and demand to remain resilient.”
Citigroup now sees the world economy growing 3% this year and 2.8% in 2023. Its economists said if a recession did occur it was likely to be a “garden variety” one in which unemployment rises several percentage points and output experiences a couple of weak quarters.
“We see this as a reasonable expectation, but the wildcard – as we have emphasized – is how stubborn inflationary dynamics ultimately prove to be,” they said.
