Global Monthly – What overheating could look like

The eurozone is finally starting to close the recovery gap with the US, with vaccinations enabling countries to take their first significant reopening steps. Meanwhile, surging inflation is stoking fears that the US economy will overheat. While not our base case, we find that such a scenario would ultimately drive a sharp rise in interest rates that would tip the US economy into a recession – with global macro and market spill overs. Regional updates: in the eurozone, and the Netherlands, a rapid vaccination pace and lockdown easing steps mean that these economies look to have turned a corner. In the US, growth momentum looks to be peaking, and we expect a cooling in H2 2021. We take a special look at the pandemic situation in India, and the economic implications.