Soaring energy prices and prolonged supply-side cost pressures will keep inflation elevated for longer. In Europe, year-over-year headline inflation rates will accelerate further from current levels before peaking this winter (at above 4% y/y in both the euro area and UK). We expect US inflation rates to remain elevated near current levels, even slightly higher this winter and only moderating more meaningfully after next spring. At the same time, growth momentum is slowing, the main reason being supply-side issues, as seen in raw material and labour shortages in many regions. This has increased stagflation risks, although such is not our baseline scenario.
We have raised our inflation forecasts and lowered our real GDP growth forecasts for major economies, due to soaring energy prices and prolonged supply side constraints.
The low-for-longer yield environment remains, though risks are skewed to sooner and faster monetary policy tightening globally.
Regulatory tightening in China will also hurt growth there, especially in real estate, but we do not see broad systemic risks for the economy.