Get the latest assessments from Klaus Wellershoff in conversation with Patrick Müller.
The video is from January 08, 2025
Economic growth: Are Europe and China overcoming lethargy?
Global economic growth remained at the same level as the long-term trend at the end of 2024. The global economy continues to be driven by the largest economy, the USA. It is encouraging that the downward trend in the US economy has not intensified recently. The labour market has stabilized somewhat in recent months and the industrial economy has not slumped any further. By contrast, the economies in the eurozone and China remain well below their long-term growth path. In the eurozone, the downturn is likely to continue for some time in view of the political blockades in the two largest economies, France and Germany. In China, too, a rapid economic recovery only seems possible with strong fiscal support measures.
Inflation: Will inflation rates return to the target corridor of below 2% in 2025?
Inflation remains stubbornly high in many countries. The core inflation rate, which excludes volatile price components that cannot be influenced by the central banks such as food and energy, has barely changed in the last six months in both the eurozone and the US and thus remains well below the central banks' target values. Switzerland is an exception. Here, the overall inflation rate is now 0.7% and the core inflation rate is 0.9%. Due to base effects in rents and lower electricity prices in 2025, the rates are likely to move even lower in the coming months.
Monetary policy: can the balancing act between fighting inflation and stimulating the economy succeed?
The monetary policy of the major central banks in the eurozone (ECB) and the USA (Fed) remains restrictive. This is reflected on the one hand in the balance sheet totals, which are shrinking because the central banks are withdrawing liquidity from the financial system, and on the other hand in the key interest rates, which are still well above the average of the last ten years. However, both the ECB and the Fed cut their key interest rates significantly in the course of 2024, thereby weakening the restrictive effect of monetary policy. In contrast, the monetary policy of the Swiss National Bank (SNB) can now be described as expansionary again. The real key interest rate, which is calculated by deducting the inflation rate from the key interest rate, is even negative again and the balance sheet reduction has also stalled.