Global inflation outlook points to prolonged price pressures into next year

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Global inflation outlook 2024

Highlights

Over 500 economists in a Reuters poll raised 2027 inflation forecasts for 31 of 50 economies, highlighting persistent and broader price pressures.
Crude oil prices have surpassed $100 a barrel since October 7 and are up more than 60% in eight months, raising global inflation risks.
Economists increased global growth forecasts to 3.0% for 2024 and 3.2% for 2025, with AI investment supporting economic resilience despite ongoing inflation.

Reuters poll signals broader inflation risks

As reported by Reuters, more than 500 economists surveyed this month raised their 2027 inflation forecasts for 31 of the 50 economies covered, while also lifting growth forecasts for 23 of them.

That shift suggests central banks could face a more difficult policy backdrop, with inflation no longer driven only by oil prices but increasingly feeding into wider price measures. Most central banks have raised interest rates only a few times or not at all, and further moves remain possible if inflation pressures broaden.

Janet Henry, global chief economist at HSBC, said she is becoming more concerned about inflation again as the Middle East situation evolves and escalates. Seth Carpenter, global chief economist at Morgan Stanley, said higher energy prices continue to ripple through the world economy and that signs of pass-through into core inflation measures are beginning to emerge.

Growth resilience complicates policy response

Crude oil prices have stayed above $100 a barrel since October 7, reached a six-month high of more than $117 last week and are up more than 60% since the U.S.-Israeli war with Iran began almost eight months ago. At the same time, more than $1 trillion of global investment in artificial intelligence technology since last year is helping support activity in some economies despite pressure on household budgets.

In contrast with Reuters polls in April and July that pointed to weak growth alongside high inflation, the latest forecasts indicate stronger economic performance accompanied by sustained price pressures. Economists now expect global growth of 3.0% this year and 3.2% next year, up from 2.9% and 3.1% in the July poll, while the U.S., supported by AI capital expenditure, is forecast to grow 2.3% this year and 2.1% in 2027.

Inflation concerns are also carrying political weight. Opinion polls show voters ahead of the U.S. midterm elections on November 3 are focused on living costs, while Brazil's presidential election, won by Luiz Inacio Lula da Silva for a fourth non-consecutive term, is also fought on cost of living issues.

Our earlier article on the AI-linked tech sell-off and $110 oil highlighted how falling valuations in semiconductors and AI infrastructure names coincided with a sharp rise in energy prices. We noted that the oil spike was adding to inflation risks and could keep the Fed cautious on rate cuts, raising financing costs and increasing market volatility.

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