I. Global economic perspectives Global economic outlook: proven more persistent and broad-based. Supply- Beating back inflation demand imbalances linger in many sectors as In our 2022 economic and market outlook, we global supply chains have yet to fully recover outlined the reasons why we believed that the from the COVID-19 pandemic, and as demand removal of policy accommodation would shape is supported by strong household and business the economic and financial market landscape in balance sheets buoyed by pandemic-era stimulus. the year ahead. Policy has in fact been a key The war in Ukraine continues, threatening driver of conditions globally, as 2022 has proven another surge in energy and food commodities to be one of the most rapidly evolving economic prices. Effective monetary policy requires good and financial market environments in recent decision-making, good communication, and good history. Figure I-1 shows that the current and luck. The Federal Reserve has been behind the expected pace of change in monetary policy is curve in hiking rates this year, reflecting imprecise unlike anything we’ve seen in the last 30 years, decision-making, but more importantly it is particularly on a globally coordinated scale. missing the good-luck component, posing a challenge for policymakers whose fiscal and The action taken, and likely to be taken in the monetary tools are less effective at combating months ahead, by central banks reflects an effort supply shocks. to combat multidecade high inflation that has FIGURE I-1 Globally coordinated monetary tightening %  s e t a Forecast y r c i l o United States k p n United Kingdom a  l b Australia a r t n e uroe C                Note: Dotted lines represent Vanguard’s forecast for policy rates as of October 31, 2022. Sources: Vanguard calculations, based on data from Thomson Reuters Datastream and Bloomberg. 8