Interest Rate Uncertainty in the U.S., Barclays' Pound Forecast, and IMF's Commentary on South Korea: What's Happening in Global Markets?
Economic uncertainties and geopolitical developments are drawing attention worldwide. While discussions continue over interest rate cuts in the U.S., the British pound and China's economic reforms are in the spotlight. At the same time, South Korea's growth forecasts are declining, influencing economic balances through strategic moves and trade policies.
Kansas City Fed President: “The future of interest rates remains uncertain” Kansas City Fed President Jeffrey Schmid stated that the U.S. Federal Reserve's interest rate cuts have instilled confidence in reaching the inflation target of 2%, but he noted that it is still unclear how much rates will decrease. Schmid emphasized that the decision to cut rates, based on signs of balance in labor and product markets, is indicative of confidence in achieving the Fed's goals. However, he did not provide a definitive forecast on how far rates will drop.
Barclays’ forecast for the pound: “GBP/USD could rise to 1.30” Barclays is exhibiting a positive outlook for the future of the pound. The bank predicts that the GBP/USD exchange rate could rise to 1.30 in the coming quarters, while the EUR/GBP might decline to 0.80. This optimism is supported by structural improvements, fiscal expansion policies, and resistance to tariffs. Barclays forecasts that the pound will remain strong in the medium term, highlighting the recent performance of the UK economy.
IMF lowers South Korea's growth forecast The International Monetary Fund (IMF) has downgraded South Korea's growth forecasts due to adverse trade conditions. Rahul Anand, the head of the IMF mission in South Korea, announced in Seoul that the growth forecast for 2025 was revised down from 2.2% to 2%, and from 2.5% to 2.2% for 2024. Anand noted that the uncertainty in the growth outlook is high, and risks are skewed to the downside.
South Korea's central bank may cut rates in November Barclays economist Bum Ki Son indicated that it is likely the Bank of Korea will cut its interest rates for the second time in November. Son mentioned that rates could be kept steady until clarity emerges regarding Trump's trade policies following this cut. Although the central bank’s policies may need to ease to support growth, a more cautious market environment stemming from the Fed's rate cuts has been noted.
China's central bank leaves interest rates unchanged The People's Bank of China decided to keep its benchmark lending rate, the Loan Prime Rate (LPR), unchanged as expected. The 1-year LPR remains at 3.10%, and the 5-year LPR stands at 3.60%. The LPR influences banks' pricing of loans, while the 5-year rate plays a significant role in mortgage pricing. This decision aligns with market expectations.
Chinese funds reduce ETF fees to boost competition Major fund companies in China announced they would lower fees on exchange-traded funds (ETFs). This move comes after incentives from the China Securities Regulatory Commission for reforms in index investments and the fund sector. As fund companies attempt to attract investors in an increasingly competitive environment, new capital flows are expected to target a weakening bull market.
Nomura: “Asia's economy faces political uncertainties” Nomura states that Asia may face significant economic downturns and deflation risks during Trump’s second presidential term. The report notes that high tariffs and weak global demand could adversely affect growth in Asia. However, it is anticipated that India and Malaysia could relatively benefit from shifts in the supply chain.
U.S. confirms approval for land mines use in Ukraine The U.S. Department of Defense has confirmed that the administration has approved the use of anti-personnel land mines in Ukraine. Officials indicated that Ukraine has committed not to use these mines in civilian-populated areas. The mines are designed to be non-permanent, becoming inactive after a specified period.