The global economy faces four possible scenarios ahead – none of which are particularly favorable – although there is a 1-in-5 chance that a recession will not take hold, according to JPMorgan Chase economists. In the firm’s most likely scenario, the US may reach a recession 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 reaches a recession in early 2023. “The circumstances warrant consideration of a range of circumstances,” JPMorgan economist Bruce Kassman and others wrote in a note to donors. “The most prominent event in all four scenarios presented is a recession in the US before the end of 2024. But the timing of the break, the path of the Fed’s policy, and the transformation of the rest of the world are different.” Much depends on how monetary policy is tightened at the Federal Reserve and other central banks of the world play out. The Fed and its allies have raised benchmark interest rates several times this year in an effort to control inflation that is running at the highest rates in four decades. JPMorgan’s most likely scenario, which carries a 32% probability, sees the recession holding off for a year or so as the residual impact of gradually tightening monetary policy erodes growth. “While we rule out an imminent recession, our baseline assumes that the US enters a moderate recession by late 2023,” the company said. “This situation puts the structure of US debt conditions and the rise of the dollar in the center of the view.” Kassman and his team expect the fed funds rate to hit 5% by 2023, roughly in line with market rates. The rise in interest rates has resulted in a stronger dollar, which is up about 12% year-to-date against a basket of global peers. That currency shift has seen US inflation rise in other countries that hold large amounts of dollar debt. In the second-most likely scenario, JPMorgan gives a 28% chance of economic failure until 2024. The event is delayed amid hopes that the Fed’s pause in rate hikes is consistent with lower inflation and sustained growth. However, hope does not come. “The hope behind the pause — that the restrictions would gradually bring inflation back into the comfort zone — is not being realized,” Kassman said. “With inflation under pressure, policy rates will need to rise materially and the global recession will take hold in 2024.” The other two cases carry a 20% probability. One is “damage [is] “It’s been done” and the world economy is headed for a recession. This is a set of smaller scenarios. and the tightening of financial conditions and weakness in Europe. [and] in China,” said Kassman. “We see the fifth risk that the US breaks with Europe and pulls the world economy down early next year.” Finally, the most encouraging view is another 20% chance of a “soft landing” that the Fed can hold its aggressive stance and reduce inflation without destroying the economy. “Under this scenario, slower growth and the removal of supply-side constraints are enough to lower inflation to 2% without a sharp drop in the labor market. With growth slowing, central banks could begin to adjust policy as late as 2023, setting the stage for a global expansion.” JPMorgan is not the only forecasting firm on Wall Street that sees the possibility of Over the weekend, Goldman Sachs also released an outlook in which it said the economy could see a “soft” or “soft” environment, although it expects GDP growth of 1% or so. next year.