Descriptions
Policy dialogue
Market expectations of further easing of US policy rates in 2025 have declined as inflation remains above targets while hopes that advances in AI will drive growth has led to sharp rises in equity prices. Against this backdrop, what are the major risks in 2025 to the global financial system and how vulnerable is Asia to downside risks?
Background
The October 2024 Global Financial Stability Report by the IMF notes that elevated economic and geopolitical uncertainty amid ongoing military conflicts and the uncertain future policies of newly elected governments could increase downside risks to future growth, asset prices and bank lending. In the same report, IMF Directors stressed that the widening disconnect between subdued financial market volatility, relative to elevated economic and geopolitical uncertainty, increases the chances of sharp disorderly repricing and risks to financial stability.
Against this backdrop of geopolitical uncertainty, the US dollar has been strong, and the US Fed has remained cautious in reducing policy rates as the US inflation remains above their target level. But concerns about the elevated borrowing costs for the US Treasury and a growing US debt to GDP ratio remain high on global investors’ minds. While the US dollar remains the dominant currency in international trade, the push towards greater financial integration in the Asian region has led to building infrastructure for cross-border connectivity and facilitating local currency settlements in trade. At the same time, central banks have been working on multi-CBDC projects to build common technical infrastructure to allow cross-border payments to be immediate, cheap and universally accessible with final settlement.
This special SEACEN webinar will explore what the key challenges for global and regional central banks in 2025 are and whether financial stability will remain a key concern in their minds with a new and assertive US administration, and if so, what the likely channels for risk propagation are.
Panelists
Ms Gillian Tett is the chair of the editorial board for the Financial Times and jointly serving as its U.S. editor-at-large. She writes weekly columns, covering a range of economic, financial, political and social issues.
Dr C Amarasekera, Assistant Governor, Price Stability Cluster, Central Bank of Sri Lanka, and former Alternate Executive Director of IMF.
