Global growth prospects are showing encouraging resilience

Summary

Forecast changes

• We have revised our global GDP forecast higher from a month ago. We now expect the global economy to grow 3.0% in 2024, only a modest slowdown from the 3.2% growth seen in 2023. Stronger growth trends in the U.S. and China, and to a lesser extent the United Kingdom, account for the majority of the global growth upgrade.

• We have made some notable revisions to our outlook for global monetary policy, in part reflecting lingering inflation concerns. We have pushed back our expected timing for interest rate cuts from the Federal Reserve to September, Bank of England to August, and the Reserve Bank of Australia and Reserve Bank of India to Q4. We also believe the European Central Bank (ECB), Bank of England (BoE) and the Chilean Central Bank will adopt a more gradual pace of easing than previously anticipated.

• Given our forecast for a later initial Fed rate cut, we now look for a more sustained period of U.S. dollar strength out to Q3-2024. However, we maintain our view for a trend of broad and gradual dollar depreciation beginning in Q4. Within the G10, we are less positive on the euro, yen and Canadian dollar than last month.

Key themes

• Global growth prospects are showing encouraging resilience, with U.S. activity holding up in early 2024, China's economy showing reasonably solid activity around the turn of the year, and the Eurozone and United Kingdom economies moving toward gradual recovery phases. While U.S. growth may slow later this year as international growth trends firm, the global economy should hold up quite well overall. Our forecast of global GDP growth of 3.0% for 2024 is only slightly slower than the 3.2% global GDP growth for 2023.

• Expectations for when central banks around the world will ease monetary policy are starting to diverge. Several G10 and emerging central banks—including in the U.S., U.K., Australia and India—will likely initiate monetary easing cycles later than previously forecast. We also expect a more gradual pace of easing from central banks that are yet to ease, such as the ECB and BoE, and from central banks that are already on an easing path, such as the Chilean Central Bank.

• U.S. economic resilience and elevated Fed policy rates have supported the greenback in early 2024, and are factors that could remain supportive for the time being. We still expect a trend of U.S. dollar deprecation to emerge from late 2024 as U.S. economic outperformance fades. Fed rate cuts combined with a U.S. soft landing and relatively benign financial market conditions should also contribute to an overall dollar downtrend against many G10 and emerging market currencies, a trend likely to persist through much of 2025.

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