A more bearish scenario could play out if China’s economic troubles endure and stimulus supports fail to take hold. A soft growth pulse would be a negative for commodities and risk sentiment and could weigh on growth-linked currencies. Domestically, the jump in mortgage rates could also raise financial stability concerns given elevated household debt burdens and the banking sector’s property market exposures. A spike in unemployment generated by a sharp economic slowdown could also trigger adverse non-linear outcomes.

Real gross domestic product, annual % change