Combination of stronger US economy in 2023 and stickier inflation trigger downgrades for next year
The caution centres on the belief that persistently high demand will keep inflation higher for longer, forcing rate-setters in advanced economies to keep borrowing costs elevated well into next year.
In many countries, including the US, “there will be a recession, it’s just going to come later”, said Sheets. He added that the European economy has also navigated this year “somewhat better than feared”, apart from Germany, which means the European Central Bank and the Bank of England will also likely keep rates higher for longer.
The BoE is expected to increase borrowing costs by another half percentage point to 5.75 per cent by the end of the year and is not thought likely to begin cutting until the second half of 2024.
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