The turn of the global monetary policy cycle this year, with rate cuts in the US, the eurozone and other major economies, has been a significant contributor to investor confidence and a fairly benign global macro and credit environment, Fitch Ratings says in the latest Risk Headquarters report.
However, geopolitical and political risks, deflationary pressures in China and capital market volatility risks persist, and our base-case economic forecasts include deceleration of US and Chinese economic growth in 2025.
Key Highlights:
- Major risks to global credit have not materially altered over the past three quarters, despite upside surprises to US economic growth and the beginning of rate cuts by the US Federal Reserve and ECB.
- The Key Risks to global credit outlined in the report have been updated to reflect the latest macroeconomic data, ratings trends and capital markets activity but remain broadly the same.
- These risks include Capital Market and Funding Instability, Geopolitics, Governance and Policy, and China Macro and Real Estate.
- The forthcoming US election and the policy themes that will emerge with the new Congress and administration in 2025 is the most notable event to watch in the short term with potentially significant implications for credit.
- Trade policy, in particular, could have a material effect on the global economy should protectionist measures by the US be aggressively ramped up in 2025 followed by retaliatory action by key trading partners.
Fiscal and immigration policies could also be consequential, especially should a combination of policies under a new government contribute to reversing disinflationary trends and cause a slowdown in the rate-cutting trajectory.
Last modified: October 31, 2024
