3 months ago • 2 mins
What’s going on here?
The OECD looked into the world’s economic tea leaves and foresaw an underwhelming 2024.
What does this mean?
The OECD grudgingly upped 2023’s global growth outlook to 3% – still a smidge lower than last year's 3.3% – and we owe a tip of the hat to the US economy for keeping those numbers respectable. But 2024 – well, that’s where the clouds start to gather. The culprits seem to be peskily high interest rates, which are now sapping business and consumer confidence, along with the fading of China’s once-vaunted economic renaissance. All in all, that means the OECD’s crystal ball sees growth of no more than 2.7% next year. Barring Covid-plagued 2020, that would mark the most sluggish pace since the meltdown that was the global financial crisis.
Why should I care?
For markets: Rate expectations.
Interest rates loomed large in the OECD’s forecast – and for good reason. After all, even as headline inflation seems to be in its final act, core inflation (which overlooks volatile food and energy prices) refuses to exit stage left. And that doesn’t leave central banks with a whole lot of wiggle room. In fact, plenty of central banks are set against further hikes – but when it comes to actual rate cuts, the OECD thinks their hands might be tied till well into 2024. And that means that the average Joe and businesses aren’t on the home stretch just yet.
The bigger picture: Oil’s sizzling.
With the economic picture already pretty cloudy, a comeback in oil prices was the last thing most countries needed – but supply cuts from OPEC+ have helped push them to a ten-month high. And remember, oil’s the lifeblood of most economies, so when it spills, it can dampen other areas too. If this uptrend continues, then, it might add fuel to inflation’s fire, and prolong economies’ rate-induced pain.
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