According to a research poll carried out by Reuters, continuously high inflation rates are bound to negatively affect the global economic indexes this year. The poll was focused on economists and their world economic outlook. Their concerns were based mainly on slow demands and interest rates rising faster than envisaged.

This new perspective comes sharply against the previously prevalent opinion among economists about three months ago when they pitched their camp with the Central bank and the Federal Reserve that an increase in inflation, pushed partly by COVID-related supply gridlocks, will be transitional.

Numbers Don’t Lie

In their recent quarterly research of more than 500 economists carried out in January, most economists in the forty-six economies captured heightened their inflation forecasts for 2022. Though the economists expect price pressures to be generally eased in 2023, their inflation outlook is more palpable than they were in the last three months.

In the same survey, economists reduced their world growth forecast for the year. Following growth of 5.8% in 2021, the global economy is predicted to slow down to an average of 4.3% this year, under the 4.5% previously predicted in October, partly as a result of the increased cost of living and high-interest rates. The economists still see the global economy slowing down more to reach 3.6% in 2023 and 3.2% in 2024.

More Blame on Inflation

Almost 35% of economists who responded to more questions pointed out COVID-19 variants as the leading risk to the world’s economy in 2022, while 40% of them suggested it would be inflation, and 22% said it would be central banks moving too fast on policies that people have to be concerned about.

According to David Folkerts-Landau, Deutsche Bank’s Group Chief Economist said that more odds have risen in the likelihood of an accident and the possibility of a soft landing this year needs a positive outlook and some good luck attached to it. He also noted that the pandemic and geopolitical tensions across the world are also very strong risk factors. 

The Reuters survey showed 18 out of 24 leading central banks are expected to increase interest rates for a minimum of once in 2022, as against 11 in their October survey.

The American Federal Reserve took the lead in increasing interest rates on Wednesday when it announced that it would increase the benchmark of Federal fund rates from a low point of 0.25% by March after declaring it will also stop its buying of bonds in the same month.

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