UK and US poised to fall into recession as interest rates dampen growth
theguardian.comStubbornly high inflation and higher borrowing costs are poised to drive the economies of the UK, Germany and US into recession, the leading rating agency Moody’s has warned.
In a downbeat forecast for growth across advanced G20 economies, it said a ramping up of interest rates by central banks on both sides of the Atlantic was expected to weigh on economic growth this year.
“We expect very weak growth in key advanced economies in particular, including mild recessions in the US, UK and Germany, and stagnant economic activity in France and Italy,” Moody’s said in a report.
It comes as the world’s most influential central banks attempt to squeeze high inflation out of the system through the toughest round of rate increases in decades, amid concern over the potential for persistent pressure on living standards.
Official estimates on Wednesday revealed a mixed picture across the eurozone, underscoring the challenge facing the European Central Bank, after French inflation eased to its lowest level in a year but Italy overshot analyst expectations.
France’s annual inflation rate fell by more than expected to 6% in May, down from 6.9% in April. However, inflation fell by significantly less than anticipated in Italy to stand at 8.1% May, down from 8.7% a month earlier.
German inflation fell by more than expected to 6.3%, down from 7.6% a month earlier. The figures followed a bigger-than-expected decline in Spain, with a fall in inflation to 2.9%, raising hopes that price pressures across the eurozone could cool rapidly this year. Official estimates for the 20-country bloc as a whole are due on Thursday.
Rory Fennessy, an economist at the consultancy Oxford Economics, said: “With inflation surprising to the downside in Germany and
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