Hanging tough

While growth in the western economies has moderated, it seems to be resilient, with economic momentum continuing in the United States (US) and the euro zone avoiding a contraction in the fourth quarter of 2024. Growth picked up in the fourth quarter in China as well. However, the slowdown in the United Kingdom (UK) economy accelerated, with a technical recession now being recorded. Japan’s economy too slowed down.

Central banks in many advanced economies held policy rates steady during their latest policy meetings. In the current interest rate cycle, key central banks have raised rates by 400-525 basis points. Although inflation remains above their respective targets, it has moderated significantly over the previous year.

Central banks now seem to be adopting a wait-and-watch approach to make sure the disinflationary trend sustains. The US Federal Reserve, in its latest meeting, indicated early rate cuts were uncertain, given the need to assess data carefully in the face of resilient economic activity and labor markets.