New Delhi: As central banks continue to raise interest rates to reduce persistently high inflation, analysts surveyed by Reuters have once again lowered growth projections for important economies. As a result, the global economy is on the verge of entering a recession.

The fact that most major economies are either already in a recession or are on the verge of one is encouraging because the unemployment rate is now low compared to prior recessions. According to the most recent poll, there will be the narrowest difference between growth rates and unemployment in at least four decades.

While that might lessen the severity of recessions — the majority of respondents predict they will be brief and shallow in important economies — it also might keep inflation high for longer than most people presently anticipate.

The bulk of the leading central banks worldwide have already reached the predicted terminal interest rate by more than two-thirds, but because inflation is still much higher than expected for their mandates, there is a chance that this estimate is too low.

Global central banks have spent most of this year’s frontloading rate increases to catch up after being slow to recognise the inflation concern. According to the majority of economists and central banks, there won’t be much to do in the coming year.

Michael Every, the global strategist at Rabobank, said “risk of a global recession” is what everyone’s talking about and has become mainstream in forecasts. “I think that’s pretty much a no-brainer when you look at the trend in all the key economies.”

Looking at the low jobless rate is problematic, Each said, because it is a lagging indicator and “the longer it stays stronger the more central banks will feel that they can continue to hike rates.”

Only six of the 22 central banks surveyed this time were predicted to achieve their inflation goals by the end of the next year. In surveys conducted in July, two-thirds of 18 were predicted to have achieved their individual goals by that point.

Analysts at Deutsche Bank wrote: “…history never repeats exactly, but since inflation forecasting has generally been so poor over the last 18 months, it’s worth us asking what normally happens when inflation breaches these thresholds. The answer is that it’s normally quite sticky.”

While the U.S. dollar is at a multi-decade high in foreign exchange markets based on U.S. rate forecasts, the world’s equity and bond markets are in chaos.

A solid 70% majority of economists, or 179 of 257, stated that the likelihood of a rapid increase in unemployment during the upcoming year was “low to very low,” highlighting the overwhelming consensus among forecasts that the current downturn won’t be catastrophic.

Reuters polls of experts covering 47 major economies between September 26 and October 25 predict that global GDP would fall to 2.3% in 2023 from an estimated 2.9% this year, then pick up to 3.0% in 2024.

All of those were decreases from polls conducted in July.

173 out of 242 economists, or more than 70%, predicted that the cost-of-living crisis in the countries they cover would get worse during the following six months. The remaining 64 anticipated an improvement.

While the cycle of inflation is worldwide in scope, it has been made worse by an unexpected rise in oil costs following Russia’s invasion of Ukraine on February 24. Much will rely on how far the U.S. Federal Reserve was anticipated to raise interest rates.

On November 2, the Fed is anticipated to raise interest rates by 75 basis points for the fourth time in a row. According to experts, the Fed shouldn’t stop raising rates until inflation is roughly half of its present level.

China, the second-largest economy in the world, was predicted to grow by only 3.2% in 2022, significantly less than both the official aim of about 5.5% and pre-pandemic growth rates.

The Indian economy was likewise expected to expand significantly less than its potential during the following two years, with median estimates predicting 6.1% growth in 2019 and 6.9% growth in 2022–23.

The GDP of the eurozone was predicted to rise by 3.0% this year, flatten out in 2023, and then increase by 1.5% in 2024.