High inflation to stick this year, denting global growth29 January 2022
Persistently high inflation will haunt the world economy this year, according to a Reuters poll of economists who trimmed their global growth outlook on worries of slowing demand and the risk interest rates would rise faster than assumed so far.
This represents a sea change from just three months ago, when most economists were siding with central bankers in their then-prevalent view that a surge in inflation, driven in part by pandemic-related supply bottlenecks, would be transitory.
In the latest quarterly Reuters surveys of over 500 economists taken throughout January, economists raised their 2022 inflation forecasts for most of the 46 economies covered.
While price pressures are still expected to ease in 2023, the inflation outlook is much stickier than three months ago.
At the same time, economists downgraded their global growth forecasts. After expanding 5.8% last year, the world economy is expected to slow to 4.3% growth in 2022, down from 4.5% predicted in October, in part because of higher interest rates and costs of living. Growth is seen slowing further to 3.6% and 3.2% in 2023 and 2024, respectively.
Nearly 40% of those who answered an additional question singled out inflation as the top risk to the global economy this year, with nearly 35% picking coronavirus variants, and 22% worried about central banks moving too quickly.
"The odds of an accident have risen and the likelihood of a soft landing in 2022 requires some favourable assumptions and a modicum of good luck," Deutsche Bank group chief economist David Folkerts-Landau said, noting high inflation, the persistence of supply chain strains and the pandemic, as well as international political tensions.
This month's Reuters polls found 18 of 24 major central banks were expected to lift rates at least once this year, compared to 11 in the October poll.
The US Federal Reserve on Wednesday signaled it would raise the benchmark federal funds rate from a record low of 0-0.25% in March after shuttering its bond purchase programme.