Global economic policies are currently under intense scrutiny as inflation rates soar and markets react with volatility. Major economies, including the United States, China, and the European Union, are grappling with the aftermath of aggressive fiscal measures and the lingering effects of the COVID-19 pandemic.
The Federal Reserve’s decision to hike interest rates in an attempt to curb inflation has sent ripples through global markets. The US inflation rate reached a staggering 6.8% in July 2024, the highest in over three decades, prompting the Fed to raise rates by 0.75 percentage points. This move has had a cascading effect on other economies, leading central banks worldwide to adopt similar measures​.
In China, the government’s stringent economic policies, including crackdowns on tech companies and property market regulations, have resulted in a slowdown of economic growth. The GDP growth rate fell to 4.5% in the second quarter of 2024, down from 6.3% in the previous quarter, causing concern among global investors and businesses​​.
Meanwhile, the European Union is facing its own set of challenges with inflation hitting 7.5% in several member states. The European Central Bank (ECB) has been cautious with its approach, balancing between tightening policies to control inflation and providing stimulus to support economic recovery post-pandemic​.
These economic policy shifts have led to significant market reactions. Stock markets across the globe have experienced increased volatility, with the S&P 500 dropping by 5% in a single week in August 2024. Similarly, the Shanghai Composite Index and the FTSE 100 have also seen substantial fluctuations, reflecting investor anxiety over future economic stability​​.
