Fitch Ratings, in its opening speech at the London 2024 Credit Outlook Conference, anticipates a slow pace in central banks’ interest rate cuts. Fitch Ratings President Ian Linnell stated that the U.S. elections would impact economic policies and expressed concerns about geopolitical developments, including Israel’s ongoing attacks on Gaza.
Linnell highlighted the potential impact of Houthi attacks on commercial ships in the Red Sea on supply chains. He also emphasized the importance of monitoring Russia’s foreign policy and China’s economic policies.
Brian Coulton, Fitch Ratings Chief Economist, shared the findings of the institution’s Global Economic Outlook 2024 report. Coulton noted improvement in core inflation over the last three months, indicating that central banks can now act more confidently. He stated, “Central banks have raised policy rates sufficiently restrictive and we do not expect further interest rate hikes. We expect interest rates to be lower than their current level by the end of this year, but central banks will move slowly in interest rate cuts. We expect the Fed to cut interest rates three times this year, but we don’t think it will start before June or July. The reason for this view is that demand is still somewhat strong, and labor markets remain tight. Unemployment is currently very low, and wage inflation is not falling fast enough for the Fed to confidently and aggressively cut interest rates. As the U.S. economy has shown more resilient performance than expected, we no longer predict a recession in the U.S. economy.”
Coulton expressed a lack of anticipation for significant growth in the U.S. economy due to the continued tight stance in monetary policy. Regarding China, he mentioned efforts to stabilize growth, with doubts about the effectiveness of the policies applied. Coulton predicted a decline in China’s economic growth to 4.6% due to ongoing risks in the housing market.
He also expected the European Central Bank (ECB) and the Bank of England (BoE) to move slowly in interest rate cuts. “We expect the ECB to start cutting interest rates as of April. We do not expect the BoE to cut interest rates until the first half of the year. Like the Fed, we anticipate three interest rate cuts from the ECB and BoE this year,” he said.
Coulton noted a worsening outlook in the European economy, attributing it to the global slowdown in trade affecting the manufacturing sector in Europe.
Fitch Ratings Research Unit President Ed Parker highlighted elevated political risks globally this year due to the intense election agenda. Parker mentioned that many emerging markets are under stress due to high-interest rates and predicted a sharp slowdown in China’s economic growth.