Global context: Improvements in activity have continued, though inflation has been higher than expected 

• The first half of the year confirmed some elements of our baseline scenario for 2021. In particularly, while heterogeneous, vaccination progress at the global level has enabled reopening in the developed world. This has supported further improvement in expectations for activity, in line with our 5.9% growth estimate for this year—the highest since 2007.
• On the other hand, after the first-semester hike, interest rates in the US, particularly longterm, have fallen, benefiting rate-sensitive assets like the US stocks. High risk appetite has helped keep fiscal policy that was more expansive than expected at the beginning of the year from triggering sharp hikes in real longer-term interest rates.
• Some elements have diverged from our expectations, particularly the global dollar, which we expected to weaken as reopening rotated from the US to the rest of the world. This was on-path until the Fed raised its inflation expectations and appropriate benchmark rate path in June, causing the dollar to appreciate across the board.
• There is consensus that inflation will be high relative to last year; however, figures have exceeded expectations, increasing inflationary risk and signalling lower-than-expected returns for the second half of the year.

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