Inflation to dog world economy next year, postponing rate cut calls
© Reuters. FILE PHOTO: A woman shops for groceries at El Progreso Market in the Mount Pleasant neighborhood of Washington, D.C., U.S., August 19, 2022. REUTERS/Sarah Silbiger/File Photo/File Photo
This is a significant change from expectations at the start of this year. Then, some investment banks were predicting the U.S. Federal Reserve, which sets the tone for many others, would be cutting rates right around now. A 75% majority who answered a separate question, 171 of 228, said the risk to these broadly-upgraded inflation forecasts was skewed higher, with only 57 saying lower.
While many central banks, including the Fed and the ECB, have presented a"higher for longer" narrative on rates for the better part of this year, many economists and financial market traders have been reluctant to accept that view. While most economists still say the Fed will cut by mid-year, the latest poll shows just 55% backing that scenario compared with over 70% last month.
Even the Bank of Japan, the outlier sticking to ultra-loose policy through this entire round of inflation, is now expected to abandon negative interest rates next year.
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