I’m a big Frank Sinatra fan. On any given day, his crooning is wafting through my house and car. One of Sinatra’s most popular standards is “The Best Is Yet to Come.” This week, the International Monetary Fund (IMF) is singing a downbeat sequel: “The Worst Is Yet to Come.”

The IMF and the World Bank are holding their annual meetings this week in Washington DC, to discuss the many challenges that bedevil the global economy. The IMF again slashed its forecast of global economic growth for 2023. The latest revision represents the fourth downward correction this year, a sign of fading optimism as worldwide headwinds worsen.

“The global economy continues to face steep challenges, shaped by the lingering effects of three powerful forces: the Russian invasion of Ukraine, a cost-of-living crisis caused by persistent and broadening inflation pressures, and the slowdown in China,” states the October 2022 edition of the IMF’s World Economic Outlook.

The IMF now projects global gross domestic product (GDP) to grow 3.2% this year and 2.7% in 2023. The latter figure represents a 0.2 percentage point downgrade from the previous forecast made in July. The IMF expects more than a third of the global economy to contract this year or next.

The IMF expects global inflation to peak at 8.8% this year, but to remain elevated longer than previously anticipated at 6.5% in 2023 and 4.1% in 2024.

The IMF’s outlook puts it bluntly: “In short, the worst is yet to come, and for many people 2023 will feel like a recession.” The following chart tells the story:

Corporate America and Wall Street are sounding similar alarms. Jamie Dimon, the influential chief executive of JPMorgan Chase (NYSE: JPM), told CNBC on Monday that the U.S. was likely to be “in some kind of recession six to nine months from now.”

Dimon asserted that while the Federal Reserve “waited too long and did too little” as inflation soared to 40-year highs, the central bank is “clearly catching up.”

Read This Story: The Bear Is Back

All of which brings me to the latest U.S. inflation report, which defies simple interpretation.

On Wednesday, the U.S. Bureau of Labor Statistics released the producer price index (PPI) for September. Here’s a handy snapshot, for month-over-month and year-over-year (“core” strips out food and energy):

MoM: Actual 0.4% (Forecast 0.2%, Previous -0.1%)

YoY: Actual 8.5% (Forecast 8.4%, Previous 8.7%)

Core MoM: Actual 0.3% (Forecast 0.3%, Previous 0.4%)

Core YoY: Actual 7.2% (Forecast 7.3%, Previous 7.3%)

Because the PPI measures wholesale price changes before they reach consumers, many analysts view the PPI as an earlier predictor of inflation than the more popularly followed consumer price index (CPI).

The PPI report for September is a mixed bag, but one thing is clear: this latest batch of inflation data won’t alter the Fed’s hawkish stance. The minutes of the latest Federal Open Market Committee (FOMC) meeting, also released Wednesday, underscored existing expectations of monetary policy.

A day ago, Wall Street had priced in an 81.3% chance of a 0.75% interest rate hike when the Fed meets again in three weeks. By the end of trading Wednesday, the betting remained unchanged.

Buckle up, buttercup…

Wednesday’s trading session was highly volatile, as investors tried to digest the PPI data and FOMC minutes. By the closing bell, here’s where the major U.S. equity indices finally stood: The Dow Jones Industrial Average -0.10%; the S&P 500 -0.33%; the tech-heavy NASDAQ -0.09%; and the small-cap Russell 2000 -0.30%. It was the sixth consecutive day of losses for the S&P 500.

The benchmark 10-year U.S. Treasury yield ticked slightly lower, to 3.89%. All eyes now turn to the CPI for September, which is scheduled for release Thursday.

There’s little in the PPI report or FOMC minutes for either the bulls or the bears. The shift from commodities prices falling to being flat has taken out a big disinflationary force. However, even though inflation isn’t peaking, at least it’s not accelerating. It’s also positive that the MoM PPI reading is the lowest in more than a year. PPI is moderating, but remains unacceptably high.

Problem is, inflation is largely propelled by energy prices, which in turn are influenced by the Russia-Ukraine war. The Fed has no direct power over energy prices, other than to destroy energy demand by crushing the economy.

The Fed has shown that in this inflation fight, it’s intensely data driven. Buckle up for Thursday’s CPI report.

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John Persinos is the editorial director of Investing Daily.

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