Fitch is out on global turmoil and says:

• Deep cuts to growth forecast as global trade war escalates.
• Still expects Federal Reserve to wait until Q4 before cutting rates despite deteriorating US growth outlook.
• We now expect deeper rate cuts from ECB and in emerging markets.
• Expect some additional US tariff revenues to be recycled back into US economy over the next 18 months, including through tax cuts.
• Lowered 2025 Brent crude oil price assumption by the five US dollars to $65.
• US ‘Liberation Day’ tariff hikes were far worse than expected.
• US inflation forecast has been revised up to over 4%, implying a stagnation in real wages.
• Massive policy uncertainty is hurting business investment prospects, equity price falls are reducing household wealth and US exporters will be hit by retaliation.
• China’s economy has grown faster than expected over the past year, but net trade has accounted for a third of GDP growth. This will slow sharply as exporters struggle to redirect sales in the near term.
• Import prices are set to rise sharply and there has been an alarming jump in US households’ medium-term inflation expectations over the past two months.
• The surprising weakening of the US dollar has created more space for other central banks to ease and we now expect deeper rate cuts from the ECB and in emerging markets.

Growth forecast from Fitch now see:

• Fitch has cut world growth in 2025 by 0.4pp and China and US growth by 0.5pp

• U.S. 2025 growth expected at 1.2% annually, but slowing to 0.4% YoY in Q4 2025

• China’s growth forecast to fall below 4% in both 2025 and 2026

• Eurozone growth projected to remain well below 1%

• Global growth expected to drop below 2% in 2025 – the weakest since 2009, excluding the pandemic

This article was written by Greg Michalowski at www.forexlive.com.