The Federal Reserve is set to conclude its latest two-day meeting on Wednesday March 19, 2025, and is widely anticipated to announce plans for its “balance sheet run-off” initiative, which could have an impact on the global economic outlook. The current status of the US gross domestic product (GDP) stands at a historically low 0.2 percent, although this forcast has been slightly revised upward from 0.1 percent in the most recent Federal Open Market Committee (FOMC) predictions, based on data showing improved labour market and manufacturing conditions. However, such modest growth rates, coupled with elevated stock and bond markets, are raising warranted concerns among analysts regarding the upcoming rate hike this summer, the first since 2018. The Fed’s rate policies might be strained in the short term due to cyclical effects, such as a slowing demand for global supply, but in the longer term are likely to experience more structural issues, including productivity challenges and demographics. These structural headwinds, coupled with potential political upheaval, will likely require a more nuanced and carefully calibrated approach in balancing rate increases against monetary stimulus.
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