The latest report from the International Monetary Fund (IMF) shows a downward revision in global economic growth projections, from 3.5% to 3.1%. Significant policy differences are emerging among major economies, particularly between the U.S. Federal Reserve and the European Central Bank, which have drawn substantial market attention.
In December 2024, the U.S. Federal Reserve again lowered interest rates by 25 basis points, aiming to stimulate economic growth and alleviate the negative impacts of previous high rates on businesses and households. In contrast, the European Central Bank (ECB) continues to maintain its tightening policy, citing persistent high inflation pressures in the Eurozone, particularly due to energy price volatility, which poses challenges to the fiscal and monetary policies of member countries.Global economic growth forecast revised down from 3.5% to 3.1% (Image / sourced from Pexels)
Asia has also been affected by the global economic slowdown. China's economic recovery remains weak, with domestic demand further exacerbating the pressure from declining exports. Meanwhile, Japan faces the challenge of a continuously depreciating yen, which has further eroded purchasing power. Markets widely believe that major Asian economies need to implement more measures to foster regional cooperation and growth.
Against the backdrop of global economic uncertainty, investors are re-assessing their risk asset allocations. Gold prices have risen due to increased demand for safe-haven assets, while the U.S. dollar index has shown volatility due to policy differences. Going forward, the coordination of central bank policies and how external risks are handled will be critical factors in the global economic recovery.