60 seconds with Keith Wade on cutting his global growth forecast
Keith Wade explains why the economics team has trimmed its forecast for global growth this year.
This month we’ve updated our forecast for the world economy and we’re reducing our forecast for global growth, albeit only very slightly. This is largely to reflect the weakness of activity that we’ve seen so far in 2016 in the developed market economies, particularly the US and to some extent Europe.
The emerging market forecast actually hasn’t changed and in fact, we’ve seen some good signs of revival beginning to come through in some of the near term indicators. So the forecast for emerging markets doesn’t change but overall, global growth is reduced.
We still expect the Federal Reserve (Fed) to raise rates at the end of this year and that’s really reflecting the profile of activity that we see in the US. So, having been quite weak so far this year, we think that growth will actually pick up somewhat in the third quarter, and as we move towards the end of this year.
Inflation is also likely to pick up a little as well and we think that’ll be sufficient for the Fed to raise rates by 25 basis points at the end of 2016.
Europe and Japan
Elsewhere though, we think interest rates are likely to come down. That means that the Bank of Japan and the European Central Bank are going to cut interest rates further into negative territory. We also think the Bank of England will cut rates again, down to just 0.1% in November.