![]() The Fund has cut its growth forecast for his year to 3.2%, down from 3.6% previously, and to just 2.9% in 2023, down from 3.6%. In its latest World Economic Outlook, the IMF warns that growth is stalling in the world’s three largest economies - the United States, China and the euro area. The world may soon be teetering on the edge of a global recession, only two years after the last one, warns the International Monetary Fund as it cuts its growth forecasts. 14.03 BST IMF cuts global growth forecasts as outlook darkens Under this scenario, both the United States and the euro area experience near-zero growth next year, with negative knock-on effects for the rest of the world. In a plausible alternative scenario where some of these risks materialize, including a full shutdown of Russian gas flows to Europe, inflation will rise and global growth decelerate further to about 2.6 percent this year and 2 percent next year-a pace that growth has fallen below just five times since 1970. The Fund warns that if some of these risks emerge- such as a full shutdown of Russian gas to Europe - inflation will surge even higher, and growth will be even weaker: Geopolitical fragmentation might impede global trade and cooperation.Rising food and energy prices could cause widespread food insecurity and social unrest.Renewed COVID-19 outbreaks and lockdowns might further suppress China’s growth.Tighter global financial conditions could induce a surge in debt distress in emerging market and developing economies.Inflation could remain stubbornly high if labor markets remain overly tight or inflation expectations de-anchor, or disinflation proves more costly than expected.The war in Ukraine could lead to a sudden stop of European gas flows from Russia.The risks to the outlook are “overwhelmingly tilted to the downside”, it says, picking out six key threats: The IMF also gives a stark warning that economic prospects could be much worse than its new forecasts. ![]() 14.15 BST Risks to the outlook "overwhelmingly tilted to the downside": In the UK, though, mortgage owners are usually on shorter deals, so would be hit sooner by Bank of England rate rises. ![]() Longer fixed mortgage deals mean many US housebuyers could be insulated from this (although it will scupper some remorgaging plans). New borrowers paid an average of 2.78pc in July 2021, but this has risen to 5.54pc this month, according to US lender Freddie Mac. The average rate of a 30-year fixed-rate mortgage in the US, the most popular length of loan in the country, has doubled in the past year. Mortgage affordability in the US has become increasingly stretched as the Federal Reserve raises interest rates sharply, with another steep increase of 75 basis points expected tomorrow. That’s a drop in April’s 20.6%, and the second month of slower increases, as the housing market cools due to higher mortgage rates and increasing concern over inflation. Home prices in May were 19.7% higher compared with the same month last year, according to the S&P CoreLogic Case-Shiller National Home Price Index. US house price growth has slowed, a sign rising interest rates could be taking some heat out of a market that has been red-hot for many months.
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