The U.S. and many other countries face a bleak outlook for recession as global central banks raise interest rates to fight inflation, according to Bank of America. In a process the bank calls “synchronized monetary tightening,” the Federal Reserve, the European Central Bank and their counterparts are willing to sacrifice growth to reduce inflation that has rocked the global economy for more than a year. All 29 of 34, or 85%, of the major central banks “are now tightening and tightening hard and fast,” Bank of America said in a note to clients. Dozens of indicators and trackers tracked by the bank, covering areas as diverse as industrial dynamics and trucking in the US and even white liquor sales in China, already “portray a gloomy outlook for global growth.” Analysts at Bank of America expect the US, Europe, Japan and the UK to experience a “moderate recession”. “Unfortunately, the policy setting is not conducive to a turnaround in growth prospects in the foreseeable future,” they wrote. “In fact, given that Fed tightening cycles more often than not end in recession, things are likely to take a turn for the worse.” For investors, this means taking cover in defensive sectors that thrive in downturns. The bank said “one of the most aggressive tightening episodes in history” was sending warning signals “that appear to be at odds with segments of the investment community expecting a soft landing.” The report comes a little more than a week before the Fed is expected to approve a third consecutive interest rate hike of 0.75 percentage points, which would push benchmark rates to a range of 3%-3.25%. The ECB also voted to raise rates by three-quarters of a point last week, while policymakers insisted they did not expect the tightening to lead to a recession. Others on Wall Street are also sounding the alarm that too much tightening will do. BlackRock strategists said in their weekly market commentary that the ECB, in particular, “doesn’t allow for how it will further crush activity in our view by trying to combat high inflation. We think the ECB will wake up to this reality sooner than markets expect — but not before it inevitably faces a severe recession.” Bank of America analysts also said they think investors are overly optimistic about the implications of the central bank’s policy. Low rates and asset purchases, known as quantitative easing, helped prop up financial markets during the pandemic, while the reversal of those policies coincided with a sharp downturn. The Fed increased its balance sheet outflows to a maximum of $95 billion a month in September, which Bank of America estimates equates to a 0.15 percentage point increase each month. “Not only are growth indicators steadfastly on the downtrend, the hawkish stance of central banks will maintain downward pressure on the global growth trajectory without any inflection,” the bank said. “And if we end up in a recession, remember that markets have never bottomed before a recession started.” Bank of America advises clients to stick to defensive sectors as the risk of a policy error — central banks raising rates even as inflation cools — continues to grow.