Global Risks 2023 – Midyear Review

Tani Fukui Shan Ahmed David Heslam Douglas Renwick David Richter
JUN 29, 2023

Key Takeaways


In the U.S., we see an increased risk of sticky or poorly controlled inflation, as financial stability concerns reduce the Federal Reserve’s (Fed) ability to slow inflation.


In Europe, central banks continue to struggle to lower inflation in a sustainable manner.


In Asia, the U.S.-China relationship remains the greatest source of uncertainty.

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Since our last global risks update in January, we believe risks have increased, on balance.

For the U.S., we continue to expect a recession with inflation below 3%, year on year, by the end of 2023, although we are less certain about the ability of the Fed to control inflation in that timeframe. Financial stability concerns, while less acute than in the first weeks after the March bank failures, remain a constraint on the Fed’s ability to slow inflation, in our view. We see risks in the U.S. markets’ (including real estate) ability to adjust to a rapid tightening of monetary policy after an extended period of living with very low rates and central bank quantitative easing (QE) programs.