With forecasts of a recession in the US and UK this year proven wrong, there is cause for cautious optimism that policymakers can achieve a soft landing despite inflation.
Given all the uncertainty in the world economy today, we have been reminded that for all the authority that economics commands, it is still a social science. Many major developments over the past year have departed from the consensus forecast, exposing the limitations of our understanding.
Most notably, many experts and forecasters predicted a recession in the United States this year. But not only have we avoided that (so far); the latest inflation figures have led many sell-side forecasters to write down the probability of a recession happening at all.
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Jim O’Neill was chairman of Goldman Sachs Asset Management and former commercial secretary to the UK Treasury.
