Inflation to dog world economy next year, postponing rate cuts
By Hari Kishan
BENGALURU (Reuters) -
High inflation will dog the world economy next year, with three-quarters of over 200 economists polled by Reuters saying the main risk is that it turns out higher than they forecast, suggesting interest rates will also remain higher for longer.
Several central banks are still expected to begin cutting interest rates by the middle of 2024, but a growing number of economists surveyed are adjusting their views, pushing the more likely date into the second half of next year.
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.
Despite broad success in bringing inflation down from its highs — the easier bit — prices are still rising faster than most central banks would prefer and hitting their inflation targets is likely to be tough.
The latest Reuters poll of over 500 economists taken between Oct. 6 and Oct. 25 produced 2024 growth downgrades and inflation upgrades for a majority of the 48 economies around the world surveyed.
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.
The results follow news on Thursday the U.S. economy unexpectedly grew nearly 5%, annualised, in the third quarter, underscoring how the strength of the world's largest economy is setting it apart from most of its peers.
The survey results also follow a warning from European Central Bank President Christine Lagarde, who said after the ECB snapped a 10-meeting tightening streak that «even having a discussion on a cut is totally, totally
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