In defiance of prior predictions of a downturn, the global economy is expected to maintain its strong momentum for the remainder of the year and into 2025, according to a Reuters survey of analysts who felt that faster growth than anticipated was more likely than decline.

The central banks, who quickly hiked rates in an attempt to bring inflation down to target, now face new hurdles as a result of this change in the economic outlook. They may need to wait even longer before considering rate reductions.

The two largest economies, the United States and India, were predicted to make the largest contributions to the acceleration of growth.

A Reuters survey of 500 analysts covering 48 economies conducted between March 27 and April 25 found no decline in the consensus assessment of the euro zone or China, the world’s second-largest economy.

Global growth was predicted to reach 2.9% this year, up from 2.6% in a poll conducted in January, and 3.0% in 2025. Over 90% of regular contributors revised their opinions while maintaining that there was a good possibility that growth could be much higher.

Out of 162 economists surveyed, 98 expressed a 60% confidence that this year’s global economy would grow more quickly than anticipated rather than less quickly than projected.

“We are continuing to be surprised by the resilience of the global economy. Now, part of that is we entered the year with subdued expectations, we thought that there would be a deceleration this year,” said Nathan Sheets, global chief economist at Citi.

Thursday’s closing price of US stocks was down due to the country’s economic growth coming in below expectations and ongoing inflation.

Thus far, the global economy has shown signs of growth in several key regions, such as the United States, China, and, to a lesser extent, Europe. Thus, it feels substantial.”

Conversely, robust growth was anticipated to sustain higher interest rates and inflation for an extended period of time.

By year’s end, 16 out of 21 central banks—more than three-quarters of them—were predicted to still be battling above-target inflation, up from 10 in the quarterly survey conducted in January.

According to financial market pricing, major central banks are still expected by economists to lower interest rates this quarter or the next. Though most now predict less cuts by year’s end due to persistently high inflation.

As per the survey, the U.S. Federal Reserve is anticipated to initiate rate cuts in September and again in Q4, which is significantly later than its March start date and the six cuts that the financial markets had already factored in before the year started.

The Reuters consensus in January was more cautious, projecting four cuts beginning in June.

Even with the weak Q1 GDP growth that was released on Thursday, there was still a chance that the Fed will reduce rates this year because the underlying inflation statistics that went along with the report indicated that pressures were intensifying rather than decreasing.

It was still anticipated that the European Central Bank will lower interest rates by 25 basis points in June and then by another two in the second half of the year to boost the eurozone’s growth, which was only predicted to average 0.5% in 2024.

The strong dollar, which is up more than 4% this year against a basket of currencies, is already priced in to this growing disparity.

“One of the most frequent questions we get is, ‘Can Europe start cutting before the Fed?'” TD Securities’ head of global macro strategy James Rossiter said.

“And I would say…when we look back in history, whether the ECB starts in June and the Fed starts in September, it will all look like it’s part of the same cutting cycle.”

According to the survey, the Bank of England, which raised borrowing costs in December 2021 before any other major central bank, will also hold off on lowering them until the following quarter.

(Adapted from Reuters.com)

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