Growth slowdown

Question: What factors will affect growth over the next six to 12 months?

Steve Chiavarone: It really starts with the inflation picture. Inflation is running at a multi-decade high level and it's also quite widespread. We often say if your explanation of inflation starts with the words 'it's just about', it's probably wrong because it's just about energy, but it's also just about supply chains and COVID-zero policies in China and what's going on in Russian and Ukraine. But it's also about wage inflation, which is running at levels much higher than the Fed has typically tolerated. It's about home price inflation that's also running at multi-decade highs. It is, in fact, widespread. And while the drivers of that inflation have been related to the pandemic and disruptions, it's also about unprecedented fiscal and monetary policy stimulus that was put in place during the pandemic and then was left there for quite a while, in fact, probably for too long. And so you now have a Federal Reserve that has had to become very aggressive on the hawkish side in terms of tightening monetary policy to try to slow demand, to try to get price stability back in place. And that has implications for growth. It has implications for slowing growth. But we're starting to see signs of that. And it does raise the prospect of a potential recession, as the Fed really kind of tightens financial conditions and tries to slow growth. So that's something that we're watching. It's something that we're concerned about. And it puts us in a position where our outlook is amongst the most cautious outlooks that we've had in quite some time.