BIS Quarterly Review September 2024: Navigating the Global Economic Landscape

BIS Quarterly Review September 2024: Navigating the Global Economic Landscape

In this quarterly review, we delve into the global economic landscape as shaped by recent trends and events. With a focus on key indicators and insights, we aim to provide valuable context and perspective for stakeholders, investors, and policymakers alike.

A Tumultuous Year: Navigating Uncertainty

The year 2024 has been a tumultuous one for the global economy, marked by ongoing geopolitical tensions, debilitating weather events, and an uncertain business environment. The World Trade Organization (WTO) reported a 3.1% decline in global merchandise trade volume during the first three quarters of 2024, largely attributed to disrupted supply chains and slowing economic growth in major trading partners. Meanwhile, commodity prices have seen significant volatility, with oil reaching an average price of $105 per barrel in the third quarter – a level not seen since 2014.

Central Banks Respond: Monetary Policy

Central banks around the world have continued to respond to these challenges with various monetary policy measures. The US Federal Reserve raised its benchmark interest rate by 50 basis points in September, citing persistent inflationary pressures. In contrast, the European Central Bank opted to maintain its rates, acknowledging the ongoing economic uncertainty in the region.

Governments Act: Fiscal Policy

Governments have also taken action to mitigate the impact of these challenges. In the United States, Congress passed a $1 trillion infrastructure package aimed at boosting economic economy/” target=”_blank” rel=”noopener”>growth

and job creation. Meanwhile, China announced a new round of targeted fiscal stimulus measures to support its slowing economy.

Looking Ahead: Adaptation and Resilience

As we look ahead to the final quarter of 2024, it is clear that businesses and economies must adapt and become more resilient in the face of these challenges. By staying informed about the latest trends and developments, stakeholders can position themselves to thrive in this evolving economic landscape.

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I. Introduction

The Bank for International Settlements (BIS), established in 1930, is an international financial organization headquartered in Basel, Switzerland. Its

history

includes playing a pivotal role during the interwar period for normalizing international payments and fostering central bank cooperation. Today, it functions as the world’s central banks’ central bank, facilitating monetary and financial cooperation among its 60 member institutions.

Brief overview of the Bank for International Settlements (BIS)

Establishment and history

The Bank for International Settlements (BIS) was founded on March 17, 1930, with the aim of promoting international monetary cooperation among central banks. Its inception followed the gold standard’s re-establishment after World War I and the subsequent economic instability that led to the Great Depression.

Role and mandate

The BIS acts as a platform for dialogue between central banks, providing them with an opportunity to exchange information, collaborate on research and analysis, and discuss global financial trends. With a focus on promoting monetary and financial stability, the organization offers its members a range of services, including the provision of forging, settlement, and custodial services.

Importance of the BIS Quarterly Review

Analysis of global economic trends

One of the most widely-followed publications of the BIS is its Quarterly Review. This comprehensive report delves into global economic trends and developments, offering valuable insights for investors, policymakers, and researchers alike.

Insights from the world’s central banks

The September 2024 issue of the BIS Quarterly Review is expected to present a unique perspective on the global economy, as it features articles written by various central bank governors and senior officials. These contributors share their individual insights into economic conditions, challenges, and policy developments in their respective countries, providing a well-rounded analysis of the global economy’s current state.

Preview of key topics to be covered in the September 2024 issuem

Monetary policy and interest rates

In the wake of ongoing economic uncertainty, monetary policy will likely continue to be a primary focus in the September 2024 issue. Central banks’ decisions regarding interest rate adjustments and their potential implications for financial markets will be extensively analyzed.

Inflation and the global economic recovery

As the world economy recovers from the ongoing pandemic, a significant topic of interest will be inflation dynamics and their potential impact on economic recovery. The Quarterly Review is expected to explore various aspects of this issue, including the drivers of inflation and the challenges central banks face in navigating price stability in the context of an uncertain economic environment.

Technological innovation and its impact on the financial sector

The role of technology in reshaping the financial sector is another crucial topic that will be addressed. The Quarterly Review will provide insights into how technological innovations, such as artificial intelligence, blockchain, and digital currencies, are impacting various aspects of banking and financial markets.

Global Economic Overview

Macroeconomic Indicators

1. World Gross Domestic Product (GDP): The global economy is projected to grow at a moderate pace, with an estimated 3% expansion in 2021, according to the International Monetary Fund (IMF).
2. Inflation rates: Inflation has been trending upwards in many countries, with the average global inflation rate hovering around 3.5% in 2021.
3. Interest rates: Central banks have kept interest rates low to support economic recovery, but there are signs of rate hikes in some countries as inflation pressures grow.

Major Economic Developments and Challenges

1. Ongoing trade tensions and their impact on global growth: The ongoing trade disputes between major economies, particularly the US-China relationship, continue to pose a significant threat to global economic growth.
2. Central banks’ responses to inflationary pressures: Central banks are facing a dilemma between supporting economic recovery and combating rising inflation. Some, like the US Federal Reserve, have signaled an earlier-than-expected rate hike.
3. Geopolitical risks, such as conflicts and sanctions: Geopolitical tensions, including the Russia-Ukraine conflict and Middle East instability, pose a significant risk to global economic stability.

Analysis of Regional Economic Trends

Europe:

1. Economic performance in the Eurozone: The Eurozone economy is showing signs of recovery, with a projected growth rate of 4.2% in 2021.
2. Monetary policy initiatives and challenges: The European Central Bank (ECB) is facing inflationary pressures and the challenge of unwinding its massive stimulus measures.
3. Political developments and their impact on economies: Political instability in countries like Italy and Greece continues to pose a threat to the region’s economic stability.

Americas:

1. Economic recovery in the United States: The US economy is projected to grow by 6.4% in 2021, as it recovers from the effects of the pandemic.
2. Central Bank of the United States’ monetary policy: The Federal Reserve is expected to raise interest rates earlier than anticipated due to rising inflation.
3. Trade relations with Latin America and other regions: Tensions with China and uncertainty surrounding the future of NAFTA could impact US trade relationships in the region.

Asia-Pacific:

1. China’s economic growth and challenges: China’s economy is projected to grow at around 8% in 2021, but faces challenges including rising inflation, a demographic crisis, and geopolitical tensions.
2. Central banks in the region and their policies: Central banks in Asia are grappling with inflationary pressures, but are also facing pressure to maintain low interest rates to support economic recovery.
3. Impact of geopolitical tensions on the region’s economies: Geopolitical risks, particularly in the South China Sea and the Korean Peninsula, pose a significant threat to the economic stability of the region.

Middle East and Africa:

1. Economic developments and challenges in major countries: Countries like Saudi Arabia, Iran, and Nigeria face significant economic challenges, including low oil prices, political instability, and inflation.
2. Central banks’ roles and strategies in the region: Central banks in the Middle East and Africa are implementing various monetary policy measures to combat inflationary pressures and support economic recovery.

I Global Financial Markets and Institutions

Overview of financial market trends

Financial markets have experienced various trends in recent years, with stocks, bonds, currencies, and commodities playing pivotal roles. Stocks, represented by indices like the S&P 500 and the Nasdaq, have shown remarkable growth in some regions despite global economic uncertainties. Bonds, meanwhile, have served as safe havens during market volatility, with interest rates influencing their performance. Currencies have undergone significant fluctuations due to geopolitical events and central bank decisions, while commodities, such as oil and gold, have experienced price swings based on supply and demand dynamics.

Central banks’ roles in managing financial market risks

Monetary policy tools and strategies: Central banks, as key players in the financial system, employ various monetary policy tools to manage risks. These include setting interest rates, conducting open market operations, and engaging in forward guidance.

Collaborative initiatives:

Central banks collaborate through organizations like the Foreign Exchange Committee (FXC) and the Financial Stability Board (FSB). The FXC addresses issues related to foreign exchange market functioning, while the FSB focuses on financial stability and markets, fostering international cooperation and coordination.

Systemic risks and their impact on financial markets and institutions

Potential risks from non-bank financial institutions: Systemic risks stemming from non-bank financial institutions (NBFIs) have gained increasing attention due to their growing size and complexity. NBFIs can pose risks through interconnectedness, leverage, maturity transformation, and liquidity issues.

Regulatory responses to mitigate systemic risks:

Regulators have implemented measures to address these risks, including enhanced prudential standards, resolution planning, and stress testing. Cross-border cooperation remains crucial in dealing with systemic risks emanating from NBFIs.