5 2023 OUTLOOK Recession or No Recession? The U.S. economy has remained resilient to date, despite high inflation and the rapid pace of rate hikes totaling 4.25% over 10 months. Aided by a tight labor market, increasing wages and more than $1 trillion of savings leftover from the pandemic, consumer spending continued to drive U.S. growth through the third quarter. November’s consumer price index (CPI) helped to confirm that inflation has peaked, with both year-over-year headline and core readings slowing for the second consecutive month. Yet, even as inflation is easing and the Fed begins to slow its pace of tightening, we are concerned that stickier inflation drivers, namely labor and shelter costs, will keep monetary policy tighter for longer and push the economy into a mild recession. Exhibit 2: Inflation Peaking, but Still at Multi-Decade High We see a Exhibit 2: Inflation Peaking, but Still at Multi-Decade High 12  r ea 10 “ / r ea  70%  8   e probability of a  li6 d ea global recession, H 4 but in our view it 2 will likely be mild and short-lived.” 0 -2 -4 ­S €uro‚oe ­ƒ „ia Source: Bloomberg. As of November 30, 2022. 2 Source: Bloomberg. Data as of 11/30/22 In Europe, energy shortages caused by Russia’s invasion of Ukraine have already taken a toll on growth in the Eurozone and the U.K., and will keep upward pressure on inflation as long as the war continues. Despite inflation remaining at 10%, the Eurozone’s growth has surprised to the upside thus far, but the region will likely fall into recession in the first quarter. China’s growth is expected to improve and could get a boost from the end of its zero- Covid policy, although there is still uncertainty surrounding the pace of its reopening. Exhibit 3: Our Global Growth and Inflation Estimates 2023 2024 Growth Inflation Growth Inflation U.S. -0.5% – 0.5% 4% – 5% 2% – 3% 2.5% – 3.5% Eurozone -1.0% – 0.0% 6% – 7% 1% – 2% 1.5% – 2.5% China 3.5% – 4.5% 1.75% – 2.75% 4% – 5% 2% – 3% Source: BNY Mellon Wealth Management. As of December 6, 2022.