BANGALORE (Reuters) – Global growth prospects for this year and next are growing more optimistic among hundreds of economists polled by Reuters, with risks still tilted toward higher inflation even if they stick to their forecasts for interest rate cuts.
While most major central banks have managed to contain high inflation by raising interest rates rapidly over the past year, a resilient global economy with strong employment and wage growth has kept the risk that financial stress could start to push prices higher again.
Overall, a majority of 56% of economists — 114 of 202 who responded to the global inflation survey of nearly 50 major economies conducted between July 8 and 25 — said inflation was likely to be higher than they expected for the rest of the year rather than lower. The same goes for prices.
The global economy is expected to grow by 3.1% this year and next, an improvement from the 2.9% and 3.0% forecasts in the April survey, and roughly in line with the International Monetary Fund’s latest forecasts.
But even with this improvement, many central banks are still expected to cut interest rates at least twice by the end of the year.
“I think the big news is that global growth has been steady… The global economy has been able to withstand a lot of stress and challenges, and of course the major tightening phase of the last couple of years,” said Douglas Porter, chief economist at BMO Capital Markets.
“Growth remains just above 3%, despite a number of challenges… Our expectation is for growth to remain around 3% throughout the second half.”
However, among major central banks, economists expect the Federal Reserve and the Bank of England to cut interest rates twice this year, and the European Central Bank three times, according to the survey.
(Translated by Laura Contemori, edited by Antonella Cinelli)
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