January 21, 2024
2 mins read

Moody’s Predicts Inflation Return by 2025

The latest report of the global credit rating agency released on Friday also dwells on credit issues…reports Asian Lite News

Moody’s expects the inflation rate to return to central bank targets by 2025 and the US Federal Reserve to start cutting rates in May.

The latest report of the global credit rating agency released on Friday also dwells on credit issues such as the expected rate of corporate defaults, and the impact of geopolitical factors, AI and digital technology on credit metrics.

“We expect inflation to return to central bank targets by 2025 but on a bumpy path with occasional jumps that complicate policymaking and keep markets on edge. Geopolitics adds risks,” the report points out.

It states that the Federal Reserve (Fed) will begin cutting rates in May, with rates falling to 4.25 per cent-4.50 per cent by year-end. The European Central Bank (ECB) will also cut rates to 3.25 by year end. Higher UK inflation means the Bank of England will be slower to act.

According to the report, an expected normalization in Fed policy and policy efforts to preserve financial stability lower this risk. Ten-year yields will fluctuate close to 4 per cent.

The rating agency also states that speculative-grade nonfinancial corporate default rate will peak at 4.9 per cent in the first quarter, before stabilizing in the 3.7 per cent-4 per cent range in the third and fourth quarters.

As far as commercial real estate is concerned, Moody’s is of the view that rate cuts should help, but borrowing costs will remain well above the past few years.

Office is most vulnerable to further falls with remote and hybrid working the new norm.

Regarding the carbon transition financing gap, the report states that policy support and growing clean energy competitiveness is helping narrow the gap, but it will remain wide.

Dealing with the question of whether the effects of AI will show up in credit metrics in 2024?

The report states that the benefits are already visible for companies providing AI infrastructure and cloud services. But any widespread improvement in credit quality is unlikely before 2026.

The report further states that digital finance will expand in 2024, thanks to technological innovation, evolving consumer preferences and the efficiencies it offers.

But a number of obstacles will slow wider adoption.

The report also takes up the question on whether tensions between China and Taiwan will become 2024’s geopolitical hotspot.

It concludes that elections in both Taiwan and the US add risks, but the economic costs that a conflict would impose on all parties act as an effective deterrent.

As far as impact of the election supercycle on global credit is concerned, the Moody’s report states that industrial policy, immigration and foreign policy are likely to be key election battlegrounds.

The scale of and aggregate direction of policy decisions in these areas will determine credit effects.

ALSO READ: ‘Expect More Job Cuts’

Previous Story

India Records 38.9 Million Smartphone Shipments

Next Story

Experts Caution Against Overpriced Mid and Small Cap Stocks

Latest from Business

China Curbs Hit India’s Electronics Boom

The ICEA noted this results in delays, inefficiencies, and higher costs — alternatives from Japan or Korea cost up to four times more than Chinese machinery. India’s transformation into a global electronics

India Maps 8.52 MT Rare Earth Reserves

The Atomic Minerals Directorate for Exploration and Research (AMD) and the Geological Survey of India (GSI) are actively exploring and augmenting rare earth resources, while the GSI alone has added 482.6 million

‘India’s Digital Hub Ascends’

The event also featured discussions on the Quad Partnership for Cable Connectivity and Resilience, reiterating commitments made during the July 1 Quad Foreign Ministers’ Meeting India’s growing role as a key digital

India’s Job Market Surges

With hiring levels on the rise, compensation is expected to increase by 12-15% in metro cities and by 18-22% in emerging cities India’s festive season this year is poised to create more
Go toTop

Don't Miss

Bumrah Breakthrough

Bumrah is now only the fourth bowler from his country

Indian, Japanese diplomats focus on boosting bilateral ties

During the talks, the two leaders agreed to enhance bilateral