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Monthly Insights - July 2022

Khatija Haque - Head of Research & Chief Economist
Edward Bell - Senior Director, Market Economics
Daniel Richards - MENA Economist
Published Date: 28 July 2022


Monetary policy tightening continued apace in July as the FOMC followed up with a second 75bps hike and the ECB kicked off its hiking cycle as it raised rates for the first time since 2011 with its own 50bps hike. Persistently high inflation is outweighing any central bankers’ concerns around economic growth still for now, and we expect that the BoE will also hike by 50bps at its upcoming August meeting as it was met by another high inflation print for June. The outlier is the BoJ which maintained its accommodative stance even as it revised up its inflation expectations.

While the storm clouds are gathering, and the IMF has followed the World Bank and the OECD in downgrading its global growth forecast this month, for now economic activity has broadly held up and labour markets in particular continue to exhibit signs of strength. The GCC continues to look like a global outperformer, and the IMF has actually revised up its growth forecast for the wider region. Higher oil production will fuel the growth, and the UAE recorded an 8.2% y/y expansion in the first quarter. It is not only oil that is driving growth as the non-oil economy is also looking robust and the Dubai PMI survey rose to a three-year high in June – although accelerating inflation will likely slow consumption in the region in the second half of the year.

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