Hong Kong Economists Predict Global Economic Inflation to Remain Stagnant at 10% in 2024

• 13 February 2024
• Construction Focus
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As the world steps into 2024, the global economy finds itself at a crossroads, grappling with a delicate balance of risks that could shape the trajectory of the year. Schroders, in their insightful analysis on 1 February 2024, sheds light on a nuanced economic landscape, hinting at potential challenges and opportunities.

Schroders underscores a notable risk concerning the effectiveness of monetary policy and the resilience of consumer spending. Recent data suggests that monetary measures might be losing some of their efficacy, with buoyant consumer spending posing a challenge for a smooth decline in inflation. This resilience, while potentially adding 1.3 percentage points to global growth, concurrently raises concerns about delayed interest rate reductions.

The analysis brings attention to the tug-of-war between resurgent demand and inflation, which could prompt further tightening of monetary policies. Simultaneously, the potential for swift policy transmission, leading to an abrupt global economic downturn, remains a palpable threat.

Amidst these challenges, the global economy grapples with uncertainty on the supply side. Enthusiasm surrounding transformative technologies, notably artificial intelligence (AI), could fuel an investment boom, enhancing productivity and supporting a more gradual economic slowdown. Conversely, negative supply shocks, akin to a supply-side inflation scenario, might veer the global economy towards stagflation.

Schroders assigns a 10% probability to their long-standing supply-side inflation scenario, emphasizing the persistence of stagflationary concerns. Additionally, geopolitical crises, constituting a 7% probability, pose threats to commodity supplies, international trade, and investment, potentially triggering resurgent inflation. In both scenarios, central banks in advanced economies could find themselves constrained with limited room to maneuver interest rates.

• Analysis
• Economy and Finance