If your wallet has been feeling a little lighter, it’s not an illusion.That’s because because a combination of higher interest rates and higher inflation numbers are expected to take an additional 2% share of disposable income over the next 18 months, according to the Conference Board of Canada’s latest take on the economy.After a slight decline in GDP in the second quarter of this year, the Conference Board is expecting two more quarters of declines before a light rebound starting next year.Although it isn’t expecting a full blown recession — full-year growth is expected to tick in at 0.9% this year — a ‘technical’ recession is defined as two consecutive quarters of negative economic growth.Lower consumer spending is expected to have ripple effects through the entire economy that will translate into higher job vacancy rates and a slower housing market. On the bright side, the board sees no further interest rate hikes as inflation finally starts coming into the Bank of Canada’s 2% target zone..“We anticipate Canadian consumers will be in for a rough ride as a result of higher borrowing costs, with mortgage interest taking an additional 2% share of disposable income in less than 18 months.”Ted Mallett, Director of Economic Forecasting .“Consumer spending has slowed dramatically and we’re seeing a more pronounced decrease among those who are more heavily mortgaged,” according to Ted Mallett, the board’s director of economic forecasting. “We anticipate Canadian consumers will be in for a rough ride as a result of higher borrowing costs, with mortgage interest taking an additional 2% share of disposable income in less than 18 months.”Government finances “remain problematic” for all levels as they enter a post-COVID stimulus phase of decision making. With the fight on inflation nearing an end, governments have turned to more structural issues in the economy, notably building houses and supporting capital investment.A strong point for the global economy is that headline inflation has peaked in most major economies as supply shocks linked to the pandemic and war in Ukraine have subsided, it added. .Global GDP growth of 2.3% in 2023 is predicated on the inflation and interest rates. The Conference Board of Canada’s baseline view is the world’s major central banks won’t have to increase interest rates significantly higher than current levels.The next Canadian rate announcement is October 25.Likewise, the US economy continues to outperform expectations which also bodes well for Canadian exports. The Conference Board of Canada forecasts U.S. economic growth will slow down in the first half of next year, but the economy will avoid slipping into a recession as real GDP is expected to increase by 2.1% this year and 1.2% in the next.