Will Inflation and Rising Interest Rates Cause a Recession?
It depends.
We have a good understanding of the forces driving inflation today. We think most of the inflationary forces are likely to abate over the next 12–18 months.
However, there are two inflation components that might not lessen enough before higher rates cause the economy to slow down meaningfully. The ability of the Fed to achieve the right degree of slowing to the economy will require prescient handling.