We think that the now popular assumption that interest rates will be held “higher for longer” will prove incorrect as economic growth disappoints and price pressures recede. While recessions have not yet taken hold to the extent that we had feared, this seems to reflect temporary factors including households running down their savings and producers working off backlogs now that shortages have abated. With previous interest rate hikes clearly weighing on credit growth and raising debt servicing costs, it seems very likely that a sharper slowdown is to come in advanced economies. Accordingly, with few exceptions, we think that the rate-hiking cycle is already over and see cuts coming next year. Meanwhile, 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:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services