The world economy faces four likely scenarios ahead, none particularly good, although there is a 1 in 5 chance that a recession will not occur, according to economists at JPMorgan Chase. In the most likely business case, the US will likely experience a contraction by the end of 2023. Other possible outcomes are a recession by the end of next year or in 2024. In the worst case, the economy falls into recession for the early part of 2023. “Circumstances warrant considering a variety of scenarios,” JPMorgan chief economist Bruce Kassman and others wrote in a report to clients. “The dominant event in all four scenarios presented is a US recession before the end of 2024. But the timing of this break, the Fed’s policy path, and the repercussions for the rest of the world vary.” Much depends on how the tightening of monetary policy by the Federal Reserve and other global central banks plays out. The Fed and its counterparties have raised benchmark interest rates dozens of times this year in an effort to rein in inflation, which is at its highest levels in four decades. The most likely case for JPMorgan, with a probability of 32%, is that a recession takes hold in about a year, as the lagged impact of monetary policy tightening gradually erodes growth. “While we avoid a recession in the near term, our baseline assumes that the United States falls into a mild recession by the end of 2023,” the firm said. “This scenario puts the construction drag on US credit conditions and the rising dollar at the center of the outlook.” Kassman and his team expect the federal funds rate to reach 5% by 2023, roughly in line with market prices. Rising interest rates have resulted in a strengthening dollar, which is up 12% year-to-date against a basket of its global peers. That monetary trend, in turn, has seen the US export inflation to other countries that hold large amounts of dollar-denominated debt. In the second most likely scenario, JPMorgan assigns a 28% probability of no recession until 2024. The event is delayed amid hopes that a Fed pause in rate hikes will coincide with falling inflation and resistant growth. However, the optimistic outlook does not materialize. “The hope behind the pause, that tightening stances will gradually bring inflation back to comfort zones, is not realized,” Kassman wrote. “With the addition of elevated inflation, policy rates will need to rise substantially further and a global recession will take hold in 2024.” The other two scenarios have equal probabilities of 20%. One is that the “damage [is] done” and the global economy is headed for contraction. This is the least positive set of circumstances. “There is enough support to avoid a recession in early 2023, but we think it would be a mistake to ignore the risks associated with tightening conditions finances and weakness in Europe [and] in China,” Kassman said. “We see a one-fifth risk of the US breaking with Europe and bringing down the global economy early next year.” Finally, the most encouraging outlook is another 20% chance of a ” soft landing.” in which the Fed can maintain its hawkish stance and reduce inflation without ruining the economy. “We believe it is wrong to rule out a soft landing (20% chance) scenario in which recession is avoided,” the note said. “Under this scenario, slow growth and the removal of supply-side constraints are enough to push inflation toward 2% without a sharp deterioration in labor markets. With growth at a modest pace, central banks may begin to normalize policy stances in late 2023, setting the stage for a prolonged global expansion.” JPMorgan isn’t the only forecasting firm on Wall Street seeing at least one possibility. reasonable belief that the Fed can keep the economy out of recession. Over the weekend, Goldman Sachs also issued an outlook saying the economy is likely to see a “soft” or “soft” landing, though expect GDP growth of just 1% or so next year.