Unrelated to past cycles, global central banks are easing monetary policy despite strong economic growth, high asset prices, and elevated inflation, highlights Bob Elliott, the chief investment officer at Unlimited Funds. Elliott also presents the underlying data in a thread on X (formerly Twitter) that reiterates these conditions.
What Happened: Elliott on Monday said that the central banks have eased monetary policy in the past during economic downturns like “post-covid, financial crisis, tech bust and ’98 crisis.”
He shared in the thread that “Policy easing is set to add another 100bps of easing in ’25 to what is already 100bps over the last year.” Highlighting these conditions he said that “there is little indication that the global economy is in need of an aggressive easing” and the “global central bank policy is over-easy.”
“Because of recent inflation stickiness, one could argue that there is a case for skipping a rate cut at the next meeting,” said Christopher Waller, a member of the Federal Reserve Board of Governors of the United States, as per an X post on Tuesday by WSJ author Nick Timiraos.
However, Waller made a case for further rate cuts indicating easier policy, and said, “policy is still restrictive enough that an additional cut at our next meeting will not dramatically change the stance of monetary policy and allow ample scope to later slow the pace of rate cuts, if needed, to maintain progress toward our inflation target."
Why It Matters: Since monetary easing is good for the stock market as more money flows into the economy, chief investment officer at UBS Global Wealth Management, Mark Haefele termed the decade so far as the "Roaring 20s," marked by high economic growth, strong market returns, and improving productivity.
In his ‘UBS Year Ahead 2025 Report‘ he said “After strong years for equities in 2023 and 2024, we see further upside in 2025. We expect the S&P 500 to reach 6,600 by the end of 2025, around 10% higher than today's levels.”
“We expect central banks to cut interest rates further in the year ahead, reducing cash returns,” Haefele added.
Highlighting his economic outlook he said, “In our base case, we expect sustained economic growth in the U.S., supported by healthy consumption, loose fiscal policy, and lower interest rates. Tariff threats are a headwind for Asia and Europe. If imposed, they could be partially offset by reactive stimulus measures in China.”
