To combat inflation, central banks raised interest rates to levels considered restrictive to economic growth. However, with global inflation rates falling and projected to reach 4.4% by 2025, the IMF suggests these interest rates are nearing their peak. This normalization in interest rates and inflation eases the financial burden on businesses and consumers, potentially spurring an uptick in consumer activity and further investments from businesses. Leading economists are forecasting that advanced economies will achieve their inflation targets sooner than emerging markets. This recovery could be due to a combination of factors, such as stronger economic fundamentals and more robust policy responses. In recent months, the Swiss National Bank (SNB) and European Central Bank (ECB) lowered their interest rates. This is a positive sign for further cuts, with other markets following the impact of these rates closely. Inflation & Interest Rates Stabilizing
CPI Inflation Rate (%)
Forecast
8.2%
4.4% 6.0%
3.6% 2.0% 5.0%
5.9%
2.1%
2.7%
2018 2019 2020 2021
2022 2023 2024E 2025F
World
Advanced economies
Emerging market and developing economies
Interest Rate (%)
5.4% 4.3% 5.3%
Recent rate cuts by SNB & ECB
0.1% 1.3%
Jan-20 Nov-20
Oct-21
Aug-22
Jul-23
Jun-24
US (Fed)
Euro Area (ECB)
United Kingdom (BoE)
Japan (Bank of Japan)
Switzerland (SNB policy rate)
Source: IMF World Economic Outlook, July 2024, Interest rates as per central bank data of respective regions. Note: ECB = European Central Bank, SNB = Swiss National Bank.
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