Citi: ‘Broader and significant’ easing to start in H2
2024.07.18 05:43
Recent data pointed to a growth slowdown in developed markets (DMs), primarily the United States, the euro area, and China.
According to Citi economists, the key question now is whether this deceleration is a temporary downturn or signals a more pronounced weakening.
“We conclude that global growth will likely soften a notch this year but broadly shake off the challenges,” economists said in a note.
“In recent years, solid growth has persisted despite unremitting headwinds, and we expect this resilience to continue,” they added.
Central banks are nearing a point where they will have more scope to cut rates significantly, which should serve as an additional stabilizing force, Citi noted.
More concretely, the Bank of England is expected to start easing in August due to tight monetary and fiscal policies restraining services inflation. The Federal Reserve is likely to begin its easing cycle in September, with the European Central Bank (ECB) continuing its cuts. The Bank of Canada appears set to cut rates at every meeting in the second half of the year.
“To date, such cuts have been restricted to some EM central banks and a tepid first move from the ECB and several other DM central banks. But we see the tide soon turning toward a broader and more significant easing cycle,” economists continued.
They project that global growth will slow to 2.4% this year from 2.7% last year. This softening is primarily among developed markets (DMs), where growth is expected to decline from 1.7%. Economists see global growth edging back up to 2.5% in 2025.
Global uncertainty has increased following the recent assassination attempt on former President Trump.
Even before this event, prominent Democrats were debating whether President Biden is well-positioned to counter Trump’s growing candidacy.
In response, investors are increasingly adopting the “Trump trade” — curve steepeners, a strong dollar, and investments in sectors like energy and financials that may benefit from Trump’s deregulation initiatives.
