Schroeder: Central banks in various countries have limited room to implement loose monetary policies.

Schroders global investment report stated that their forecast for the global economy remains largely unchanged, with expected global economic growth of 2.7% in 2024 and 2025, slightly lower than the previous forecast of 2.8%. At the same time, they predict that inflation in 2024 will remain at 3.1%, and drop to 2.5% in 2025, slightly higher than the previous forecast of 2.4%. Schroders global stated that central banks around the world are unlikely to implement monetary policy easing to the extent expected by financial markets. Policymakers will cautiously lower interest rates to avoid a second wave of inflation. Concerns about a US economic recession are overblown Schroders global believes that financial markets' concerns about an imminent downturn in the US economy are exaggerated. The rise in unemployment is not due to layoffs, but rather due to the increase in net immigration outpacing the rate of new job creation. Additionally, the labor market has returned to a more balanced state, and hiring and wage growth should return to a more normal pace. Considering further slowing inflation and improving credit supply, this will help support steady growth in household consumption and promote overall economic activity in the US. UK economic growth set to outpace the Eurozone The Eurozone economy is burdened by weak manufacturing. Despite the global commodity cycle rebounding, factory output lags far behind consumer-facing industries. As manufacturers in other regions perform better, this may reflect a decline in structural competitiveness, prompting a downward revision in the growth forecast for the Eurozone in 2025. In contrast, Schroders global is slightly more optimistic about the UK's economic growth prospects. Currently, it is expected that the UK's economic growth rates in 2024 and 2025 will outpace the Eurozone. However, disruptions in local economic supply in recent years suggest that accelerated growth will lead to continued inflationary pressure. Policymakers expected to cautiously lower benchmark interest rates Central banks around the world are unlikely to implement monetary policy easing to the extent expected by financial markets. Policymakers will cautiously lower interest rates to avoid a second wave of inflation. Schroders global expects the Federal Reserve to lower interest rates quarterly starting from September 2024, but given unexpectedly lower core inflation, they anticipate an additional rate cut in 2025. Adjustments are made to rate forecasts for the European Central Bank and the Bank of England, reflecting a reduction in the number of rate cuts for both central banks by the end of 2025 compared to previous expectations. However, Federal Reserve Chairman Powell's remarks at the Jackson Hole conference were noticeably dovish. This increases the risk of the Federal Reserve implementing larger-than-expected rate cuts. These comments also led to a decline in the US dollar, with the dollar index falling by around 3.5% since early August. Fundamental factors suggest that the US dollar may depreciate in the medium term, but the downgrade in expectations for significant rate cuts in the financial markets is likely to provide support for the US dollar in the short term. Two-way outcomes for the US election Kamala Harris is slightly favored in the betting markets, with an implied probability of winning the US presidential election at 50.5%. Schroders global believes that the chances of Trump and Harris winning are equal, but this assumes that the predictions in the betting market are correct. From an economic perspective, if Harris were to win the US presidency, she may face a divided Congress, making the impact on the economy very limited. However, if Trump were to win, there may be a risk of renewed inflation as he would likely adopt a policy of deregulation, new trade protectionism, and anti-immigration policies.