Kose: "Higher for Longer" Central Banks to Curb Growth in Emerging Markets

The World Bank’s Global Economic Prospects report is out today. The good news it says growth around the world is stabilizing for the first time in three years. The not-so-good news is that 80% of the world’s population is going to experience growth slower than in pre-Covid levels.

Ahyan Kose is the World Bank’s Deputy Chief Economist and he joined me to discuss the report. One of the key forecasts is that global inflation is expected to moderate to 3.5% in 2024 to 2.9% in 2015. But the pace of decline is still slow and will leave central banks reluctant to start lowering rates. Thus global interest rates are likely to remain high by standards of recent decades, averaging about 4% over 2025-26, about double the 2000-19 average.

Kose says this will mean “higher-for longer” rates, tighter Global Financial Conditions, and much weaker growth in developing economies.

He told me in our interview that his base case remains two Fed rate cuts this year but “no one should be surprised” if the Fed does not cut rates at all this year.

Now hear and see why.