The global economy is in the grips of a serious slowdown, with some key economies at high risk of recession and only sparse meaningful cooling in inflation over the next year, according to Reuters polls of economists.
Most central banks are only part-way through a still-urgent cycle of interest rate rises as many policymakers make up for a collective error in judgment last year thinking supply chain-related inflation pressures would not last.
That carries with it another risk - central banks moving too quickly without taking time to assess damage from the fastest interest rate rises in more than a generation following over a decade of near-zero rates.
Despite their aggressive response - in some cases, the most in several decades - inflation has yet to ease in most of the near-50 economies covered in the June 27-July 25 Reuters surveys of more than 500 forecasters around the world.
The US Federal Reserve, due to hike rates by another 75 basis points later on Wednesday, is a case in point. Inflation there, currently at a four-decade high of 9.1 per cent, is not expected to cool to the Fed's 2 per cent target until at least 2024.
Soaring inflation has turned into a serious cost of living crisis in much of the world, pushing up recession risks.
40% Chance Of A US Recession; Rising For Other Key Economies
There is already a median 40 per cent chance of recession happening in the world's largest economy in the coming year, up sharply from three months ago, and those chances have risen for the euro zone and Britain too.
"Recessionary dynamics are increasingly evident in our forecast. Notably, we now see several major economies - including the United States and the euro area - slipping into recession. Even so, the timing of these downturns varies, and they are expected to be relatively mild," noted Nathan Sheets, chief global economist at Citi.
"By any metric, the global economy is slowing and prospects are deteriorating. Global recession is, indisputably, a clear and present danger."
Global growth is forecast to slow to 3.0 per cent this year followed by 2.8 per cent next, both downgraded from 3.5 per cent and 3.4 per cent in the last quarterly poll in April. That compares with the International Monetary Fund's latest forecasts of 3.2 per cent and 2.9 per cent.
Of the 48 economies covered, 77 per cent of growth forecasts were downgraded for next year with only 13 per cent left unchanged and 10 per cent upgraded.
Similarly, inflation forecasts for nearly 90 per cent of the 48 economies were upgraded for next year and over 45 per cent for 2024. That means no quick respite from a cost of living crisis pinching households.
Indeed, the vast majority of respondents said it would be at least next year before the crisis eases significantly (86 per cent) with more than a third (39 per cent) saying over a year.
Among the top 19 global central banks covered, a slight majority, 11, will see inflation returning to target next year.
The remaining eight will not, including some of the biggest ones like the Fed, the European Central Bank, the Bank of England and the Reserve Bank of India.
Developed ones, by contrast, are only on average about half-way through, held back in part by the European Central Bank, which only just began raising rates.
That means more rate rises still lie ahead.
"We are particularly concerned about two developments. First, the shift to aggressive hikes at many central banks. This is an inevitable outcome of moving late. However, it greatly increases the risk of overkill, as there is not time to reassess the impact of the hikes," noted Ethan Harris, global economist at Bank of America Securities.
"Second, we worry about feedback effects across regions. In particular, recessions in the US tend to impact global confidence and growth even more than warranted by the size of the US economy. Stay tuned."