September 22, 2023

The Forward View – Global: September 2023

Central banks may be at their peaks, but energy prices pose a risk to disinflation trend


  • Global inflation accelerated in July – ending the trend of disinflation exhibited over the previous nine months, albeit this largely reflected an uptick in India and Türkiye, rather than a broad-based increase. Inflation among advanced economies continued to ease – edging down to 4.4% yoy.
  • The slowing inflation trend in advanced economies has increased the likelihood that most major central banks have either reached the end of their tightening cycle or are near the peak. That said, this assumption is predicated on inflation continuing to trend lower (with rising energy prices a risk to headline inflation), and near-term risk around policy rates is still to the upside. There is considerable uncertainty around when central banks will start to cut rates.
  • Momentum across the major advanced economies was mixed in Q2 – with economic growth solid in the US and Japan but more modest in the Euro-zone and UK. These mixed signals have continued into Q3, though we expect a more general slowing from Q4 and across 2024.
  • Similarly, we have seen differing trends in the two largest emerging markets – China and India. Weak domestic demand and growth headwinds are buffeting China’s economy, while India has been stronger than anticipated – however El Nino could negatively impact the latter going forward.
  • We have revised up our global growth forecast for 2023 to 3.0% (from 2.9%). This reflects an upgrade to India that more than offset a small downward revision for China. For 2024 we expect growth to be even weaker (at 2.6%), particularly in the AEs, before a recovery in 2025 to 3.1%, assisted by an easing in monetary policy. This outlook is weaker than the long-term average of 3.4% (since 1980).
  • Risks around the outlook have become increasingly balanced, however, much will depend on the path of inflation and central bank patience (particularly as energy price risk is re-emerging) along with various geo-political pressures (Russia-Ukraine conflict and US-China tensions).

For further details, please see The Forward View Global – September 2023