The upcoming political developments will again challenge resilience. While global growth hit its lowest point in the first half of the year, the global manufacturing sector continues to face excess supply, particularly due to low demand in the Eurozone. Recession risks persist in the Eurozone and are rising in the US as the labor market weakens. We anticipate global GDP growth to be 2.8% in 2024 and 2025, with US growth slowing to 1.7% and the Eurozone reaching its potential at 1.4% by 2025. China is expected to manage its growth slowdown, achieving 4.3% in 2025. However, risks remain skewed to the downside due to heightened uncertainty in an election-heavy year and ongoing global conflicts. In a downside scenario, involving fiscal slippage and increasing geopolitical risks, global growth could be 1.5 percentage points lower, and inflation 1 percentage point higher, which would result in prolonged high-interest rates.

Central banks have postponed or slowed down their easing cycles due to persistent inflation. Inflation targets are now likely to be reached in early 2025, six months later than initially expected. Globally, inflation is projected to reach 3.9% in 2025, down from 5.6% in 2024, with the US at 2%, the Eurozone at 2.1%, and China emerging from deflation with 1.5% inflation. We have delayed our forecast for the first rate cut by the Federal Reserve to December, followed by five rate cuts in 2025, bringing rates down to 4%. The European Central Bank will cut rates once more in September and then wait for the Fed before continuing its easing cycle in 2025 with four additional cuts, bringing rates down to 2.5%. Central banks in emerging markets will maintain a cautious approach to easing as the Fed’s delay dampens optimism.

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