Major economies will not fall into a monetary policy-driven recession over the next year, according to Goldman Sachs.
Goldman's view is based on the first nine countries to implement tightening, mostly from emerging economies in Latin America and central and eastern Europe, as well as New Zealand.
It found that none of the countries showed signs of recession as their labor markets continued to hold up.
Among the three main factors supporting this economy according to Goldman are:
A strong balance sheet supports the production of surplus savings and rapid consumer credit growth.
Strong labor demand has supported job growth in several countries.
Reopening from the Covid-19 shutdown is still driving growth.
An overheated labor market and a weakening exchange rate are among the negative factors, although there is some evidence that the supply chain crisis is abating and persistent core inflation may have peaked in most economies.
While it is too early to tell whether economies that raise rates early will contract, evidence so far suggests they may be able to avoid recession, Goldman Sachs said.
