Shifting policy mix points to economic slowdown

Boosted by the fiscal stimulus, GDP growth is still on track to be a solid 2.8% this year but, as that stimulus fades and the Fed continues to tighten monetary policy, we expect growth to slow to 2.2% in 2019 and only 1.5% in 2020. Our baseline forecast incorporates an economic slowdown rather than an outright recession, but there would be a significant risk of the latter developing in late 2019 or in 2020. With limited signs of any major imbalances, asset bubbles or credit build-up, however, we would expect such a recession to be modest.