World – Macro-economic Scenario 2023-2024: a peculiar slowdown
- 2023.07.04
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- Focus – The three core trends in the global geopolitical rebuild
- Developed countries – Pumping the brakes: a less-abrupt but unmistakable slowdown
- Focus – Banking sector stability tested by monetary tightening
- Emerging countries – Desperately seeking an anchor
- Oil & gas – Is a new equilibrium being reached?
- Monetary policy – Two-sided stability
- Interest rates – Are we there yet?
- Exchange rates – The dollar feels some downward pressure
- Economic and financial forecasts
In summary
The major developed economies have shown less wear than anticipated, but this does not mean they are on the road to recovery. If anything, their resilience is pumping the brakes rather than jamming them. The support factors, with all their unexpected length and vigour, are now running out as the causes of the slowdown grow stronger – inflation is still high; monetary and financial tightening are aggressive. And if we focus in on the tenacity of growth, we can already make out clear signs of fragility and uneven performance, especially in the Eurozone.
The banks are in trouble does not mean that central banks should turn away from their pet priority of reducing inflation. Financial stability will not be achieved at the expense of price stability. The latter continues to argue for monetary tightening even though we are close to the end, whereas managing liquidity requires specific instruments. Anticipating an early end to monetary tightening, justified by the financial stability goal, the bond markets celebrated excessively. More patience is needed before interest rates start down a slight slope: wait until inflation rates approach the central banks’ targets and the end of monetary tightening comes into view. It won’t be much longer now.
Catherine LEBOUGRE, Economist