The UK's economy is expected to perform the worst among developed nations in 2024 due to sluggish growth. High interest rates and inflation have weighed on the UK economy, with GDP growth projected at just 0.4%, trailing other countries. Despite global economic recovery, the UK's economy lags behind due to government policies and external factors, leading to a weaker outlook compared to other advanced nations.
The Federal Reserve (Fed) decided not to lower interest rates at its Wednesday meeting, believing inflation remains too high. Inflation is currently 2.7%, above the Fed's target of 2%, and prices are not declining as quickly as hoped. Despite concerns about the economy slowing down, the Fed believes reducing inflation is a priority. The Fed also slightly eased its bond-buying limitations in a modest attempt to stimulate the economy.
The Federal Reserve's latest statement shows changes compared to the one released in March. It expresses more concern about ongoing inflation and supply chain disruptions. The Fed also removes language indicating that it expects inflation to be transitory, acknowledging the persistence of price increases. This suggests the Fed may consider raising interest rates sooner than previously anticipated to keep inflation in check.
The Federal Reserve won't make any changes to interest rates this week, keeping them at the current high level. The only news expected from the Fed's meeting is an announcement that it will reduce the amount of money it's withdrawing from its holdings. Despite strong inflation, the Fed is holding back on rate cuts until it's sure inflation is under control. The market now expects only one small rate cut by the end of next year.
The gold standard, dismissed in the past, is gaining attention again. Central banks are buying gold. Some cryptocurrencies are pegged to gold. Dissatisfaction with fiat currencies grows as global debt balloons. Zimbabwe has even pegged its new currency to gold. These events suggest a return to a gold-based monetary system could be on the horizon.
High U.S. interest rates generally impact emerging markets negatively. Their debts, often in U.S. dollars, become more costly, and investors seeking higher returns in the U.S. withdraw their funds. This creates tighter financial conditions. According to IMF's Kristalina Georgieva, this issue is more significant for emerging markets while Europe may face less impact from the difference in monetary policies.
