Quarterly Review: Q4, 2023
The ongoing drag from high interest rates meant activity
in advanced economies generally slowed over Q4. And the
latest evidence, including PMI surveys, suggested that while
developed markets should avoid recessions, global growth
will generally undershoot consensus expectations in 2024.
There are a couple of reasons why this is the case. For one,
monetary policy should remain a drag on growth in 2024.
Admittedly, the pass-through of interest rates to activity is
proving to be weaker than in previous cycles. But higher
interest rates have already caused bank lending to slow
sharply. And higher policy rates are gradually feeding
through to debt service costs. As income growth slows in the
year ahead, rising interest payments are set to eat up a larger
share of household incomes.