Top economists unanimous on 'higher for longer' rates as inflation threats linger

cnbc.com:

Top economists and central bankers appear to be in agreement on one thing: interest rates will stay higher for longer, clouding the outlook for global markets.

Central banks around the world have hiked interest rates aggressively over the past 18 months or so in a bid to rein in soaring inflation, with varying degrees of success thus far.

Before pausing its hiking cycle in September, the U.S. Federal Reserve had lifted its main policy rate from a target range of 0.25-0.5% in March 2022 to 5.25-5.5% in July 2023.

Despite the pause, Fed officials have signaled that rates may have to remain higher for longer than markets had initially expected if inflation is to sustainably return to the central bank's 2% target.

This was echoed by World Bank President Ajay Banga, who told a news conference at the IMF-World Bank meetings last week that rates will likely stay higher for longer and complicate the investment landscape for companies and central banks around the world, especially in light of the ongoing geopolitical tensions.

U.S. inflation has retreated significantly from its June 2022 peak of 9.1% year-on-year, but still came in above expectations in September at 3.7%, according to a Labor Department report last week.

«For sure, we're going to see rates higher for longer and we saw the inflation print out of the U.S. recently which was disappointing if you were hoping for rates to go down,» Greg Guyett, CEO of global banking and markets at HSBC, told CNBC on the sidelines of the IMF meetings in Marrakech, Morocco last week.

He added that concerns around persistently higher borrowing costs were resulting in a «very quiet deal environment» with weak capital issuance and recent IPOs, such as Birkenstock, struggling to find