JLL Office Property clock Q1 2022

The start of 2022 was a quarter of two halves. At the beginning of the year the emerging story was of higher energy and commodity prices pushing up inflation. By February, rates of inflation across Europe had jumped to multi-decade highs, and knock-on effects to wider economic conditions were beginning to emerge. However, this was against a backdrop of otherwise reasonably good economic conditions, and monetary policymakers were raising rates to tame inflation with limited concern for the growth impact. This changed on February 24th, however, with the events unfolding in Ukraine profoundly effecting the economic outlook for Europe. Energy and commodity prices have risen further. Supply chain disruption and costs have climbed higher from already unprecedented levels. Business and consumer confidence have taken a turn for the worse, and not just in countries bordering or close to the directly conflict affected areas. The quarter closed with producer prices rising, inflation expectations rising, and forecasts for GDP growth being pared back. That is not to say that we face recessionary conditions, as many countries in Europe were expected to see above-trends rates of growth this year as they concluded their recoveries from Covid-19. But tighter monetary conditions are coming. The Bank of England is widely expected to raise its policy rate further this year as it continues to tackle inflation, while the ECB has announced the end of its asset purchases and is expected to raise rates before year end if inflation stays high. Non-Euro central banks were ahead of the curve, raising policy rates toward neutral before the latest crisis. They are well positioned to cut rates to shore up growth if needed.