TOKYO – The great US recession debate is heating up as Goldman Sachs Group assigns 35% odds to an American economic downturn over the next two years. Yet what if Wall Street’s most influential investment banks are underplaying risks to the world’s biggest economy?

They could very well be, and this risk is wreaking rising havoc in Asian markets amid wildly conflicting signals from the US Treasury Department and US Federal Reserve.

The main driver of a US contraction, says chief Goldman economist Jan Hatzius, will likely be the Fed’s hiking of interest rates enough to tame the worst inflation surge seen in 40 years. Having waited too long to address Covid-19 and supply chain-related inflation in 2021, the Fed must now also confront Ukraine crisis-driven price surges.