Fitch Ratings: US Interest Rates Impact Labor Market and Global Politics
New Delhi, India – In a recent report, Fitch Ratings highlighted that high interest rates in the US since 2023 are affecting the labor market and demand. The global rating agency also pointed out that politics remains highly uncertain, with ongoing geopolitical risks.
US Economic Slowdown
Fitch noted signs of a slowdown in the US, such as weak credit growth and slowing consumer spending. This trend is expected to continue in the second half of 2024, with real GDP growth slowing but staying above recession levels. The agency mentioned that continued disinflation and the start of global monetary policy easing have lowered the chances of a major negative credit risk.
Global Monetary Policy
The European Central Bank (ECB) made its first rate cut in early June, followed by the Swiss National Bank and the Bank of Canada. Fitch expects a slower pace of rate cuts from the US Federal Reserve in 2024, with two reductions likely in the second half of the year.
Political Uncertainty
Fitch emphasized that the upcoming US election in November is crucial for global credit, as it could change policies in important areas. Ongoing conflicts in Ukraine and between Israel and Hamas, along with other geopolitical tensions, remain significant risks.
Impact on India
In India, analysts believe that US interest rate cuts amid weak growth could attract investment. Vaibhav Porwal, Co-founder of Dezerv, stated that India’s strong economy and fiscal discipline make it an attractive destination for investors. Milind Muchhala, Executive Director at Julius Baer India, noted mixed activity by foreign portfolio investors, influenced by global equity markets, the dollar index, and geopolitical events.
US Federal Reserve’s Stance
US Federal Reserve Chair Jerome Powell hinted at a possible interest rate cut in September if economic conditions meet expectations. The central bank recently decided to keep the federal funds rate unchanged at 5.25 to 5.5 percent.
Doubts Revealed
Fitch Ratings -: Fitch Ratings is a company that gives scores to countries and companies to show how safe it is to lend them money.
US Interest Rates -: US interest rates are the cost of borrowing money in the United States. When they are high, it becomes more expensive to take loans.
Labor Market -: The labor market is where people look for jobs and employers look for workers. It shows how many people are working or looking for work.
Global Politics -: Global politics refers to how countries interact with each other, make agreements, and handle conflicts.
Credit Growth -: Credit growth means how much people and businesses are borrowing money. If it is weak, it means fewer loans are being taken.
Consumer Spending -: Consumer spending is the amount of money people spend on goods and services. If it slows down, people are buying less.
Monetary Policy Easing -: Monetary policy easing means making it easier to borrow money, usually by lowering interest rates.
Geopolitical Tensions -: Geopolitical tensions are conflicts or disagreements between countries that can affect global peace and economy.
Investment Inflows -: Investment inflows are when money from other countries is invested in a country’s businesses or projects.
