Global Scenarios Service: Inflation Victory?

The outlook for the global economy has improved since the previous quarter’s Global Scenarios Service report and a soft landing is in prospect. While we anticipate a period of only steady and unspectacular growth ahead, this is no mean feat after the aggressive policy rate hikes of 2022 and 2023.

Risks to global growth now appear broadly balanced. Downside risks are still dominated by the potential fall-out from geopolitical tensions, both in the Middle East and between China and Taiwan, and the possibility of sticky inflation and higher for longer interest rates. Upside hopes rest on more substantial monetary policy easing than expected.

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This Quarter’s Risk Scenarios are:

Central banks signal victory over inflation. Policy easing bolsters the global economy as inflation returns to target, central bank caution fades, and policy shifts to a stance more supportive of growth.
Higher for longer interest rates. High-interest rates weigh on stock markets and house prices, as central banks are challenged by the inflationary fall-out from persistent shipping disruption.
Middle East escalation. Global growth falters as energy supply disruption triggers an oil price spike, stock markets weaken, and policy rates rise further amid higher near-term inflation.
Increased China-Taiwan tensions. Tensions weigh persistently on the global economy as Taiwan and its allies raise trade and technological barriers against China and investor sentiment worsens amid conflict fears.

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The expert behind the research

Jamie is Head of Macro Scenarios. He leads the production of macro-economic scenarios for the Global Scenario Service and is responsible for identifying and writing about key risks to the global economy.