emerging
Policy Triple Pivot Needed
A shift in focus from monetary to fiscal tightening, alongside structural reforms, is crucial for sustainable growth.
Timeframe
near-term
Subcategories
Impact areas
Detailed Analysis
As inflation nears central bank targets, a policy triple pivot is necessary. The first pivot involves a shift from monetary to fiscal tightening, as central banks lower policy rates and governments address debt dynamics. The second pivot requires rebuilding fiscal buffers through gradual and credible adjustments. The third, and most challenging, pivot involves structural reforms to address long-term growth challenges, requiring careful consideration of social acceptability.
Context Signals
Central banks in advanced economies have begun cutting policy rates.
Public debt levels remain above pre-pandemic levels.
Medium-term global growth remains lackluster at 3.1%.
Edge
Credible fiscal adjustments could enable greater monetary policy flexibility to support growth.
Structural reforms focused on technology, innovation, and competition could unlock significant productivity gains.
International cooperation is crucial to address shared challenges and mitigate fragmentation risks.
