Resilience and Divergence

The International Monetary Fund's (IMF) latest World Economic Outlook characterizes the global economy as “resilient despite uneven growth.” We see the same in our forecasts.

After a solidly disinflationary 2023, recent inflation readings in developed countries have been a mixed bag. Labor markets are only gradually loosening. Growth is uneven, with the U.S. accelerating while others are trying to escape a stall. Policymakers everywhere are struggling to balance growth and inflation.

Soft (or soft-ish) landings are still likely in most places, but challenges will be inevitable. Following are our thoughts on how major markets are faring.

United States

  • Growth in America continues to exceed expectations. The economy has been expanding at a real pace of over 3% over the past four quarters, well above its long-term potential. Household and government spending are leading the way. Details on recent performance can be found in our most recent U.S. outlook.
  • Like a distant mirage, cuts from the Federal Reserve appear no closer today than they were at the start of the year. Outsized payroll gains in the first three months of the year show a durably strong labor market; immigrants are filling vacancies. The March consumer price index was discouragingly elevated at 3.5% year over year, pushed up by energy, shelter and services. None of this gives the Fed any reason to hurry. We now expect only two rate reductions this year, in September and December.