The Organisation for Economic Cooperation and Development (OECD) has forecasted that global economic growth will only moderately pick up over the next year due to the full effects of central bank rate hikes.
The OECD predicts that the world economy will grow by 2.7% this year, up from its previous forecast of 2.6% in March. However, growth would only slightly accelerate next year to 2.9%, as rate hikes by major central banks increasingly drag on private investment, starting with housing markets.
The OECD also highlighted that inflation in the Group of 20 major economies would remain well above many central banks' targets despite the interest rate hikes.
OECD chief economist Clare Lombardelli warned that a substantial risk is that inflation proves to be more persistent and in response, interest rates need to be higher for longer. The OECD's outlook also predicted the U.S. Federal Reserve's main interest rate will peak soon at 5.25-5.5%, with "modest" rate cuts in the second half of 2024.
