The conclusion of 2024 marks a pivotal juncture for the global
economy. A year that saw inflation finally subsiding in most advanced economies
is ending with a wave of central bank decisions that signal cautious optimism
tempered by persistent uncertainties. From the Federal Reserve in the United
States to smaller emerging market economies, monetary authorities are balancing
fostering growth and managing inflationary pressures. This essay explores the
major economic developments and central bank actions as the world prepares for
2025.
The global economic landscape
is closing out 2024 with a series of critical central bank decisions and
economic developments that signal cautious optimism amid lingering
uncertainties. Around 22 central banks will be deciding on their interest rate
outlook for this week setting the stage for 2025. We will witness extensive currency volatility starting
2025.
Monetary Policy Overview
- Federal
Reserve (US):
·
A quarter-point rate cut is expected this week,
reflecting cooling inflation trends.
·
Future rate decisions might be tempered by
potential inflationary pressures from the incoming Trump administration's
tariff policies.
- Bank
of England (UK):
·
Likely to hold rates steady, balancing growth
concerns and persistent inflation.
·
Monitoring the global trade environment and
domestic price pressures.
- Bank
of Japan (Japan):
·
Following its exit from negative rates, the BoJ
is likely to maintain its current stance until 2025. They might go for rate
hikes in 2025.
- Other
Advanced Economies:
·
In Europe, the Bank of Sweden might enact
further rate cuts, while Hungary and the Czech Republic are expected to hold
rates steady.
·
Similarly, Indonesia and the Philippines are
both poised to reduce borrowing costs by 25 basis points.
·
The Bank of Russia may deliver a significant 200
basis point hike, pushing rates to a record 23%, in response to high inflation.
- Emerging
Markets in Asia:
·
Central banks in Pakistan, Indonesia, and the
Philippines are poised for rate cuts to support growth.
·
Thailand’s central bank is expected to keep
rates steady at 2.25%.
- Israel:
Inflation is rising modestly amidst economic strain from the
Gaza conflict, keeping rate hikes off the table until mid-2025.
- Canada:
In Canada, Finance Minister Chrystia Freeland is set to
release a long-delayed budget update amid speculation that she has breached her
promise to keep the deficit under C$40.1 billion. Meanwhile, Purchasing
Managers' Index (PMI) data from Australia, India, and Japan will offer valuable
insights into business sentiment and regional growth trends.
Beyond monetary policy, fiscal
measures and economic data releases are shaping the narrative as 2024 ends. In
Canada, Finance Minister Chrystia Freeland is set to release a long-delayed
budget update amid speculation that she has breached her promise to keep the
deficit under C$40.1 billion. Meanwhile, Purchasing Managers' Index (PMI) data
from Australia, India, and Japan will offer valuable insights into business
sentiment and regional growth trends.
In Europe, survey indicators will
shed light on the impact of political turmoil in France and Germany on business
confidence. Further south, Israel’s inflation rate is expected to rise
modestly, reflecting the economic strain of the ongoing Gaza conflict and
increased government spending.
Conclusion:
While inflation is cooling in many parts of the world, risks remain. The prospect of new tariffs from the Trump administration in the U.S. could reignite price pressures globally, complicating monetary policy decisions. In Russia, persistently high inflation underscores the difficulty of maintaining economic stability amid geopolitical and domestic challenges. China’s ability to sustain recovery through targeted stimulus will also be crucial for global economic momentum. As 2024 draws to a close, the global economic landscape is marked by transition.
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