Economy will bend not break under higher rates

We expect the economy to bend rather than break under the pressure of a rapid monetary tightening by the Fed. We anticipate that real economic growth will remain consistently below its 2% potential pace over the next two-and-a-half years, but the risks of a recession remain limited. As global supply shortages gradually improve and commodity prices drop back, lacklustre domestic demand growth will drive inflation lower too, although core inflation won’t get back to target until 2024.