According to economists at JPMorgan Chase, the global economy faces four possible scenarios — none of them great — but there is a 1 in 5 chance of a recession. In the firm’s most likely scenario, the US could contract in the latter part of 2023. Other possible outcomes are a recession late next year or in 2024. In the worst-case scenario, the economy will enter recession in early 2023. “The circumstances call for consideration of a number of scenarios,” JPMorgan Chief Economist Bruce Kassman and others wrote in a note to clients. “Under the four scenarios presented, the dominant event is a US recession by the end of 2024. But the timing of that break, the path of Fed policy and the reverberations in the rest of the world are different.” Much depends on how the Federal Reserve and other global central banks tighten monetary policy. The Fed and its peers have raised benchmark interest rates dozens of times this year to control inflation, which has reached its highest levels in four decades. JPMorgan’s most likely scenario, with a 32% chance, sees a decline a year from now as the lagged effect of monetary policy tightening gradually dampens growth. “Barring a near-term recession, our baseline forecast suggests the US will enter a mild recession in late 2023,” the firm said. “This scenario puts construction at the center of the outlook for US credit conditions and dollar growth.” Kassman and his team expect the fund’s rate to reach around 5% in 2023, in line with the market price. Higher interest rates have led to a strengthening of the dollar, which is up about 12% year-on-year against a basket of global peers. This currency trend has in turn seen export inflation to other countries with US dollar debt. In the second most likely scenario, JPMorgan pegs the chance of no recession until 2024 at 28%. The event was delayed in hopes that a pause in Fed rate hikes would coincide with lower inflation and steady growth. However, the optimistic forecast will not be realized. “The hope behind the break — that restrictive stances would gradually return inflation to comfort zones — is not being realized,” Kassman wrote. “As higher inflation is embedded, policy rates will have to rise significantly and a global recession will persist in 2024.” The other two scenarios have an equal probability of 20%. One of them is “damage”. [is] Already Done” and the global economy is headed for contraction. This is the least positive set of circumstances. “There is enough support to avoid a recession in early 2023, but we think it would be a mistake to ignore the risks associated with it.” with the tightening of financial conditions and weakness in Europe [and] In China, – Kassman said. “We see a fifth of the risk that the US will break up with Europe and collapse the global economy early next year.” Finally, the most encouraging forecast is another 20% chance of a “soft landing”. then the Fed can maintain its aggressive position and reduce inflation without destroying the economy. “We believe it is wrong to rule out a soft landing scenario (20% assumption) that will not lead to a recession,” the note says. “Under this scenario, slow growth and the removal of supply-side constraints are enough to reduce inflation to 2% without a sharp deterioration in the labor market. With growth at a modest pace, central banks will begin to moderate policy stances in late 2023, setting the stage for an extended global expansion.” JPMorgan isn’t the only forecasting firm on Wall Street that sees at least a reasonable possibility. The Fed can keep the economy out of recession. Over the weekend, Goldman Sachs also released its forecast saying the economy could land “soft” or “soft,” but it expects GDP growth of 1% or more. next year.