In the current uncertain environment, it is a challenging time to make predictions about the future. Nonetheless, to conclude let me say a few words on what these results might imply for the policy landscape going forward. As I discussed earlier, the new analysis presented in this speech suggests that the effects of the key drivers of Global R*, particularly increasing longevity, are expected to persist. Absent a significant reversal in the key trends that have driven down Global R*, we may expect it to remain low. So it is not unreasonable to expect that Global R*, the long-run anchor for UK equilibrium interest rates, will remain low. Therefore, cyclical adjustments in short-term nominal interest rates – like those we are currently witnessing in the United Kingdom and abroad – will for the foreseeable future continue to be played out against the backdrop of low global equilibrium real interest rates. While we have considered several important drivers of Global R* in the past, other factors may  Page 16  come into play over time. You may wonder, for example, whether the pandemic could have impacted some of the key drivers of Global R*, such as productivity growth. The simple answer, of course, is that we do not yet know. It is too soon to tell what the long-run impact of the pandemic will be for the economy.
This was based on a comparison of 70 policy tightening episodes in 19 Advanced economies (AEs) and six Emerging Market Economies (EMEs). Strong growth and high job vacancies, as well as front-loaded rate hikes can help prevent a hard landing. Conversely, rapidly rising inflation, low term spreads and elevated debt levels raise the risk of a recession, especially if there are persistent negative supply shocks. Comparisons with the current conjuncture suggest a mixed prognosis across these factors. Overall, for the global economy to successfully stay on the ridge, inflation needs to peak soon, underpinned by improved demand-supply balance as multiple driving factors reequilibrate. This would lessen the constraints facing central bank’s responses – allowing the pace of monetary policy tightening to ease off by year-end. At that point, a relatively contained period of sustainable below trend growth should ensue with inflationary pressures gradually receding into 2023. If instead, the global economy veers off the ridge to a hard landing and equilibrating forces are stifled, the result will be higher inflation for longer, a more protracted period of monetary tightening, possibly higher unemployment, and mounting debt vulnerabilities. I note, but will not address here, that the Eurozone and other regions face additional idiosyncratic concerns which bear close monitoring. Singapore Economy: Some Pro-equilibrating Shifts  Some growth moderation The Singapore economy is moderating, with average growth of 4.1% (y-o-y) in H1 2022. Following the strong rebound of 7.4%, last year, the economy’s output gap is estimated to be mildly positive at mid-year.