While markets rallied during the first trading day of the year, mostly fuelled by the possibility that central banks like the United States Federal Reserve are poised to reduce interest rates throughout 2024, analysts are keeping a wary eye on the global economy in light of numerous geopolitical and socio-economic issues affecting different parts of the world.
Some investors believe that the Fed could drop interest rates by up to 1.5% by the end of the year. However, this could do little to lower policy rates which remain at 4%, significantly higher than they’ve been in over twenty years.
Experts also say that the US’ current monetary policy could slow down the nation’s economic growth as it remains within the neutral range wherein the economy is unable to progress but is also too good to regress.
Throwing a Wrench into Globalization
Meanwhile, geopolitical issues could also lead to rough sailing for the global economy in 2024.
As the conflict between Russia and Ukraine remains unresolved and Israel has been aggressive in its actions in Gaza, analysts are up in the air about their forecasts for the European economy and that of the Middle East.
China’s hostile actions in Southeast Asia and the impending national elections in several nations including the United States could also serve as economic wildcards that could change matters in different parts of the world.
Higher interest rates have forced many countries to restructure their debt liabilities as it has become virtually impossible for them to pay increasing interest. This can be seen in the way debt negotiations have become common of late, along with the highest number of corporate bankruptcies filed since the pandemic hit back in early 2020.
Meanwhile, consumers need to deal with the fact that higher borrowing costs could throw a wrench into their individual or household budgets. Savings may yield more, but their buying power has been significantly reduced over the past several years.