Global | Risk metrics show worsening growth/inflation trade-off
The global economic outlook appears to be deteriorating, according to our quarterly review of alternative measures of economic risk. Most of the metrics now point to weaker risk-weighted growth in 2021, with no catch-up in 2022.
The metrics we reviewed broadly support our overall risk assessment. Almost all agree with our judgement that risks to our baseline growth forecast lie to the downside. Most also align with our view that upside risks are still material, with evidence from past forecast errors suggesting notable upside potential.
What you will learn:
- Risk metrics suggest a worsening near-term trade-off between growth and inflation.
- Most forecasters previously attached an implausibly low probability to inflation surprises, whereas they now see a significant chance of elevated inflation over the next two years despite a weaker growth outlook.
- Both businesses and professional forecasters appear to see inflation as primarily a near-term concern.
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