The biggest challenge for major central banks in the world is to rein in inflation expectations without causing a recession, S&P Global Ratings said in a statement on Wednesday. 

"The balance of risks is clearly on the downside with recession probabilities rising, especially in the US, and the macro effects of Russia-Ukraine conflict persisting," the global rating agency said in a statement.

"Economic momentum will likely protect the US economy from recession in 2022. But the weight of extremely high prices is damaging purchasing power and, as aggressive Federal Reserve policy increases borrowing costs, it's hard to see the economy walking out of 2023 unscathed," it added.

So far, the Fed made a total of 150 basis points of a rate hike since March in order to tame 40-year high inflation that climbed to 8.6% in May on an annual basis.

The US central bank is widely expected to make another 75 basis points of an interest rate increase next month.

In Europe, inflation is also hovering at record highs, while the European Central Bank is expected to make a rate hike of 25 basis points in July, followed by another hike of at least that much in September.

The biggest problem, however, is whether central banks' aggressive monetary tightening could cause a recession in their domestic economies and in the global economy as a whole.

"A growth slowdown across a wide swath of economies has already begun. Despite the strong and optimistic start to the year, this deceleration became inevitable once it was clear that central banks needed to raise rates sooner and faster to get inflation under control," S&P said.

"This tightening of financial conditions foretells a slowdown. The invasion of Ukraine, with spillover effects on food and energy markets and confidence, has exacerbated this dynamic ... If employment starts to slide, a recession is almost inevitable," it added./agencies