Global markets have their hopes pinned on interest rate cuts from the US Federal Reserve, as inflation inches down. Nearly seven out of every 10 economists polled by Reuters expect a rate cut by the American Central Bank in September this year.
However, if growth remains strong in the US and new jobs continue to get added, it may affect the odds of a reduction in inflation, further deferring the impending rate cut cycle that the markets are waiting for.
The US added 175,000 jobs in April, a strong growth, although a little less than the estimates of JPMorgan, a global investment bank.
A delay in US interest rate cuts will impact emerging economies like India, too.
All else remaining equal, the sustained strength in the US dollar, reflecting the relative strength of the economy, will affect exchange rates, export growth, as well as the flow of global capital into equity and bond markets.
However, the same survey showed that economists aren’t as optimistic about the growth in Europe and China.
Three out of four economists expect the growth in China to moderate in 2024. The largest economy in Asia grew 5.2% in 2023, and it’s widely expected to slow down further.
The International Monetary Fund has projected a 4.6% growth in China this year.
Europe is getting squeezed between geopolitical escalations in its neighbourhood, as well as tensions within the continent, including high inflation.
Nearly 70% of economists predicted weak growth for the remainder of 2024, the WEF survey showed.
The risks emanating from international wars have not waned. Ninety-seven percent of economists still see geopolitics as a source of volatility. What makes it worse is that more than eight out of every 10 of those surveyed see domestic tensions adding to the volatility this year.
At least 64 countries, including India, the US and the UK, have elections scheduled this year.
