The latest activity and survey data have provided even more evidence that the resilience in activity in advanced economies over the first half of 2023 is now fading. High interest rates are clearly weighing on credit growth, and a further rise in debt servicing costs in the coming months should contribute to a period of economic weakness in most DMs. Headline inflation is already falling sharply, and the combination of weaker activity and a gradual loosening in the labour market should exert downward pressure on core rates too. Accordingly, we doubt that the recent ‘higher for longer’ rhetoric from policymakers will last, and we expect central banks to start cutting rates next year. On the other hand, a step-up in policy support looks set to deliver a modest cyclical recovery in China, but the revival will not be strong or sustained.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services