Most Global Economies Remain in Disequilibrium, Requiring Policy Action

Bridgewater

Bob Prince, Aaron Goone

Article

1 Pages

Bridgewater Associates examines why most major economies remained out of equilibrium despite substantial monetary tightening. It argues that persistent inflation, tight labor markets, and uneven policy responses leave Europe and North America requiring restraint, while Japan and China face substantially different economic and policy conditions.

Key Takeaways

Europe Furthest Out: European unemployment and wage growth were at their tightest levels in 40 years, reinforcing persistent inflation pressures.v
Earnings May Need Falling: Historical experience suggests European corporate earnings may need to decline around 25% for unemployment to rise enough to cool wage growth.
North America Still Tight: After roughly 18 months of aggressive tightening, US and Canadian inflation had decelerated, but both remained above the 2% inflation target.
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