BENGALURU β High inflation will dog the world economy next year, with three-quarters of over 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 , 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. 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 β the easier bit β 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 economists taken between Oct. The results follow news on Thursday the U.
The Reserve Bank of New Zealand, which often leads the interest rate cycle, was also forecast to wait until July-September before cutting. The majority backing no cuts until the second half of has also grown stronger for the Reserve Bank of Australia, Bank Indonesia and the Reserve Bank of India. 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.
Crucially, most economists agree the first easing steps will not be the beginning of a rapid series of cuts. Asked what would prompt the first cut by the central bank they cover, over a two-thirds majority, of , said it would be simply to make real interest rates less restrictive as inflation falls.
