Economists are increasingly optimistic about global growth prospects for this year and the next, according to a recent Reuters poll. However, concerns about inflation persist, even as experts maintain their forecasts for interest rate cuts. A majority of economists about 56 per cent out of 202 respondents believe that inflation is more likely to be higher than their initial forecasts for the remainder of the year. Similarly, expectations for interest rates align with this sentiment. The global economy is projected to grow at 3.1 per cent in both 2024 and 2025. This represents an upgrade from earlier forecasts of 2.9 per cent and 3.0 per cent in April and is in line with the International Monetary Fund's (IMF) latest prediction. Despite challenges, the global economy has maintained resilience, growing slightly faster than three per cent, according to Douglas Porter, chief economist at BMO Capital Markets. Many central banks are still expected to cut rates at least twice by year-end. The Federal Reserve and the Bank of England (BoE) are anticipated to implement two rate cuts each, while the European Central Bank may cut rates three times, the economists expected. Economists' optimism contrasts with earlier worries about the US economy's ability to withstand aggressive monetary tightening. Growth rates for 24 out of 48 top economies have been revised upwards compared to three months ago. Thirteen of these are from developed economies, addressing previous concerns about weakening demand, while the remaining 11 are from emerging economies. While, eighteen economies experienced a downgrade, and six remained unchanged. As growth remains steady, inflation will continue to determine the extent to which interest rates can decrease and the timing of such reductions. Currently, the majority of central banks (19 out of 27 with an inflation target) are not projected to reach their targets by the end of 2024. Risks related to global core goods prices, including shipping costs, are on the rise, James Rossiter, head of global macro strategy at TD Securities, said. Economists also predict that services will be the most persistent component of core inflation for the remainder of 2024. Shelter and rents follow closely, while other factors contribute as well. A majority of 60 per cent, specifically 131 out of 220 respondents, indicated that interest rates by the end of the year are more likely to be higher than their current forecast rather than lower. Attribution: Reuters
