Allianz Investment: The Federal Reserve may pause interest rate cuts in the first half of 2025, with the policy rate expected to remain at 4%
Allianz Investment expects that the new Trump administration may introduce more fiscal stimulus measures, helping the U.S. economy surpass other developed economies by 2025, but it may also lead to a resurgence of inflation. The Federal Reserve may pause interest rate cuts earlier in the first half of 2025, with the policy rate maintained around 4%. The divergence in global economic growth is intensifying, with differing economic prospects for Europe and Asia
According to the Zhitong Finance APP, Allianz Investment stated that if Trump regains the White House, the U.S. economy and markets are bound to undergo significant changes. The new government has the opportunity to introduce more fiscal stimulus measures and relax regulations, which may help promote economic growth and enable the U.S. economy to surpass other developed economies by 2025. However, loose fiscal policies could lead to a resurgence of inflation. In light of this, the firm believes that the Federal Reserve may pause interest rate cuts earlier in the first half of 2025, with the policy rate likely to remain around 4%.
According to Allianz Investment's latest market outlook, Trump's return to the presidency coincides with a pattern of divergence in economic growth, inflation, and interest rate trends around the world. It is expected that the divergence among countries' economies will intensify by 2025. Based on the latest global macro data, economic growth has rebounded somewhat, but the firm remains cautious about the outlook.
In Europe, factors such as political paralysis, weak productivity growth, and lackluster consumer confidence may mean that the Eurozone will experience another year of mediocre growth. As the European Central Bank guides deposit rates below the neutral level of 1.75% in the coming quarters, Allianz Investment expects the UK economy to record slight growth in 2025, allowing the Bank of England to gradually cut rates once per quarter.
In Asia, Allianz Investment estimates that Chinese authorities may introduce more monetary and fiscal stimulus measures, but they will not be the large-scale "rocket launcher" plans that the market hopes for. Similarly, Japan's stimulus plan of up to $250 billion is also expected to boost the local economy. Additionally, the firm anticipates that the Bank of Japan will gradually raise its policy rate to at least 1% by 2025