Global Prospects and Policies
The slowdown in global economic activity is broad-based and sharper-than-expected, with inflation higher than seen in decades. The economic outlook depends on a successful calibration of monetary and fiscal policies, the course of the war in Ukraine, and growth prospects in China. Risks remain unusually large: monetary policy could miscalculate the right stance to reduce inflation; diverging policy paths in the largest economies could exacerbate the US dollar’s appreciation; tightening global financing could trigger emerging market debt distress; and a worsening of China’s property sector crisis could undermine growth. Policymakers should focus on restoring price stability and alleviating cost-of-living pressures. Multilateral cooperation remains necessary to fast-track the green energy transition and prevent fragmentation.
Wage Dynamics Post–COVID-19 and Wage-Price Spiral Risks
Inflation has reached a 40-year high in some economies. Although wage growth has generally stayed below inflation so far, some observers warn that prices and wages could start feeding off each other, with wage and price inflation ratcheting up…
