London, 14 December 2021
The Fitch report comes as global inflation is on the rise with energy prices soaring.
Fitch stated, on Tuesday: “The global inflation shock has intensified in recent months as annual inflation rates for many of the largest economies climbed to their highest levels for years or even decades, as illustrated in Fitch Ratings’ latest ‘20/20 Vision’ chart pack”. “The US stands out among the major developed economies, with a larger increase in consumer spending on durable goods, a bigger rise in core consumer goods prices and clearer evidence of rising services and wage inflation”, it added. Further data released by Fitch shows U.S. consumer inflation reaching 6.8% year-on-year in November, the highest increase in 39 years.
Similarly, Fitch data showed that Eurozone recorded its highest inflation rate since the monetary union, at 4.9%; German inflation at 5.2%, a 29-year high, while rapid growth in durable goods consumption has contributed to global goods shortages and supply-chain bottlenecks, recently compounded by higher energy prices, added further. Meanwhile, according to the same Fitch report, emerging markets have also had very sharp inflation increases – Turkey, Brazil and Russia recorded 21.3%, 10.7% and 8.4% year on year growth, respectively, while inflation has, however, generally remained low in the largest Asian economies.
The agency said central banks in some emerging economies have tightened their monetary policies, with rate hikes seen in Brazil, South Korea, Mexico, Poland and South Africa in the past two months.
In a separate statement, Fitch noted that it expects North American economies to grow strongly in 2022.
"The US and Canadian economies will both grow above trend in 2022, powered by strong labour markets, improved household balance sheets and business investment," it said.
"Fiscal and monetary policies will tighten in 2022. Overall fiscal policy will be contractionary as pandemic relief spending is withdrawn, although 2022 deficits will exceed pre-pandemic levels in Canada and the US," it added.
The agency said it expects the US Federal Reserve to taper its asset purchases through June 2022 before raising interest rates gradually.
Canada is on course to start raising rates earlier in 2022, while it had announced to end its asset purchases in October, it noted.
(Research and edit by: The Decision Maker)