According to Bank of America, the US and many other countries face bleak prospects of a recession as global central banks raise interest rates to combat inflation. In a process the bank calls “synchronized monetary policy tightening,” the Federal Reserve, the European Central Bank and their partners are willing to sacrifice growth to reduce inflation that has made wobbled the global economy for more than a year. In total, 29 out of 34, or 85%, major central banks are “tightening right now and they’re tightening fast and thick,” Bank of America said in a client note. The dozens of metrics and trackers the bank tracks, covering areas as diverse as industrial dynamics and trucking in the US and even white wine sales in China, have “described a dire outlook for global growth.” Bank of America analysts expect the US, Europe, Japan and the UK to see a “mild recession”. “Unfortunately, the policy setting is not conducive to changing growth prospects any time soon,” they wrote. “In fact, keeping in mind that Fed tightening cycles, more often than not, end in recessions, it’s likely that things will get worse.” For investors, that means including defensive sectors that perform well during recessions. The bank said “one of the most drastic tightening in history” is sending warning signs that “seem contrary to segments of the investment community expecting a gentle landing.” The report comes more than a week before the Fed is expected to approve the third consecutive 0.75 percentage point rate hike, which will bring the benchmark interest rate up to the 3%-3.25% range. . Last week, the ECB also voted to raise interest rates by three-quarters of a point while policymakers insisted they did not expect tightening to lead to a recession. Others on Wall Street are also sounding the alarm that too much tightening will cause harm. In their weekly market commentary, BlackRock strategists said the ECB in particular “doesn’t acknowledge how it will crush activity further by trying to combat high inflation, in our view.” We think the ECB will wake up to this reality sooner than the market expects – but not before it inevitably faces a severe recession.” Bank of America analysts also said. know they think investors are being overly optimistic about the ramifications of central bank policy. Low interest rates and asset purchases known as quantitative easing helped support financial markets during the pandemic outbreak, while reversing those policies coincided with a sharp downturn. The Fed in September increased its balance sheet flows to a maximum of $95 billion a month, which the US Central Bank estimates equates to a 0.15 percentage point increase per month. Not only will growth indicators stabilize in an ongoing downtrend, the hawkish stance of central banks will maintain downward pressure on the global growth trajectory, the bank said. there is no change in vision”. “And if we end up in a recession, remember that the market never bottomed before the recession started.” Bank of America is advising clients to stick with the defensive sectors as the risk of policy mistakes – central banks raising interest rates even as inflation cools – continues to rise.