Most advanced economies have so far dodged the recessions that we, and many others, had expected to start in the first half of this year. The relative resilience of activity can be pinned on several supply- and demand-side props to growth, as well as the fact that the full effect of monetary tightening is taking its time to feed through. However, as the various tailwinds fade and interest rate hikes bite in advanced economies – and as the re-opening recovery fizzles out in China – the resilience of global activity in early 2023 is unlikely to last. We are forecasting mild recessions in the coming quarters in major DMs, which should help bear down on underlying inflation. That said, it will take a year or more for core inflation rates to close in on 2%, meaning that DM central banks will be later than their EM counterparts to ease monetary policy.
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