As central banks navigate the complexities of the current economic landscape, investment managers are urging them to find a balance between price stability and economic growth. COWRY Assets Management Limited has highlighted the necessity for adaptable monetary policies in light of persistent inflation and slowing economic activity. The firm projects global economic growth at 3.3% for 2025 and 2026, which falls below the historical average of 3.7% from 2000 to 2019. In particular, the U.S. economy is expected to grow by 2.7% in 2025, while China is projected to achieve a growth rate of 4.6% [84a0d1b8].
The European Central Bank's president, Christine Lagarde, has also expressed concerns about economic pressures that echo the 1920s, emphasizing the need for a broader policy focus that includes establishing buffer stocks for essential commodities. She warned that inflation could rise again due to ongoing supply chain disruptions and stressed the importance of structural reforms and international cooperation among policymakers [1bdeff40].
Investment managers have pointed out that protectionist policies and geopolitical tensions pose risks to economic stability, further complicating the task for central banks. They advocate for complementary fiscal policies to ensure debt sustainability, as global debt has reached an alarming US$312 trillion as of Q2 2024 [84a0d1b8].
As central bankers reflect on their recent experiences, they are reminded to remain humble and recognize the role of luck in their policy decisions. The lessons learned from the recent inflation period will be crucial as they prepare for future crises, ensuring they are equipped to prevent a repeat of historical economic downturns like the Great Depression [7f2feadc].