Predictions for 2022

I am not saying we will get double-digit levels of inflation. I am saying that we will exceed the inflation targets by significant amounts for sustained periods. And we’ll have to bring it back to target, which means tighter policy. What I am worried about is that markets don’t seem to be anticipating this tightening, and that there are many assets which are priced as if rates will stay low for really long. In this environment of potential overheating, seeing ten year real interest rates in the US around minus 1% tells me something’s not adding up. Either my economics is faulty or the markets are either sort of valuing Fed credibility significantly in believing that the Fed will get things under control after a very short spike, or they believe something else will happen.
Raghuram Rajan, University of Chicago

For the developing world, the era of cheap money will end, even if central bankers in advanced economies hold back on plans to tighten their own monetary policies. Given the uncertain, uneven, and unequal recovery from the pandemic, this is bad news for most of the world. Prepare for massively increased financial instability, with more debt crises and banking crises generating economic turmoil in many parts of the world.
Jayati Ghosh, University of Massachusetts Amherst

I worry that climate politics will significantly worsen US-China relations, which are already at a breaking point. Add the intensification of repression in China and the tensions over Taiwan and you have the makings of a prolonged bout of instability.
Daron Acemoglu, MIT

[P]olitical dysfunction is increasing in both advanced economies and emerging markets. The US midterm elections may offer a preview of the full-blown constitutional crisis – if not outright political violence – that could follow the presidential vote in 2024. The US is experiencing near-unprecedented levels of partisan polarization, gridlock, and radicalization, all of which poses a serious systemic risk. Populist parties (of both the far right and the far left) are growing stronger around the world, even in regions like Latin America, where populism has a disastrous history. Peru and Chile both elected radical leftist leaders in 2021, Brazil and Colombia may follow suit in 2022, and Argentina and Venezuela will remain on a path to financial ruin.
Nouriel Roubini, New York University

Technology will bring the surprises. One hopes for more demonstrations of the power of recent biomedical and genetic research, amply validated by the rapid development of safe and effective COVID-19 vaccines. There also may be new leaps in additive manufacturing and machine learning.
Diane Coyle, University of Cambridge