Citigroup sees global recession odds close to 50%

Citigroup calculates a near 50% probability of a global recession as central banks race to raise interest rates to quell inflation, which has been partially fueled by the impact of the Ukraine war and the Covid-19 pandemic. .

The recession is an “increasingly palpable risk” to the economy, analysts at Citigroup wrote in a note on Wednesday, assessing the likely path of global growth over the next 18 months.

“History experience indicates that disinflation often carries significant costs to growth, and we see the aggregate probability of recession now approaching 50%,” the analysts said.

Several central banks, including the US Federal Reserve, have been aggressively raising lending rates as the cost of living hits record levels. Federal Reserve Chairman Jerome Powell said Wednesday that the US central bank is not trying to trigger a recession but is committed to controlling prices.

Citigroup said that while recession risks are higher, all three scenarios of a “soft landing, higher inflation and global recession (are) plausible and should remain on our radar”, with something closer to a soft landing like your base scenario.