On February 1st, the global economic research team at Schroders released a report stating that recent robust expenditure data reflects a possible weakening of the effects of monetary policy, while consumption remains strong, which could hinder a stable decline in inflation and even potentially raise interest rates. Schroders' global investment analysis shows that although a scenario of strong consumption may increase global economic growth forecasts by a cumulative 1.3 percentage points, it may also lead to a 1.3 percentage point increase in inflation and delay in rate cuts. In fact, the recovery in demand and rise in inflation could prompt further tightening of monetary policy by central banks worldwide. At the same time, the long and variable lag effects of policy transmission may occur faster than expected, increasing the risk of a "hard landing" for the global economy. However, there are also many uncertainties on the supply side of the global economy. The excitement in financial markets over new technologies such as artificial intelligence (AI) may quickly an investment boom, driving productivity improvements and resulting in a more moderate landing for the economy than baseline forecasts suggest. But similarly, negative supply shocks on the supply side could lead the global economy towards stagflation. Recent signs of a slowdown in labor markets in the United States and elsewhere may only be temporary, and high wage growth could make it difficult for high inflation rates to fall. Geopolitical risks may interrupt the supply of commodities (especially oil) and hinder international trade and investment, leading to a rise in inflation. These two scenarios could leave central banks in developed economies with little room for rate cuts. Schroders estimates the probability of a stagflation scenario on the supply side of global investment to be as high as 10%, with a 7% probability of geopolitical risk scenarios, reflecting the greatest risks faced by baseline forecasts. Schroders' global investment baseline forecast scenario Schroders expects global gross domestic product (GDP) growth forecasts to slow from 2.7% in 2023 to 2.2% in 2024 and 2025. Economic growth in developed economies is expected to decrease from 1.6% in 2023 to 1.0% in 2024, before rebounding to 1.1% in 2025. Currently, despite the strong performance of the U.S. economy, expected economic growth is expected to slow as high interest rates gradually impact economic activity. Additionally, the eurozone is expected to fall into recession by the end of 2023, while the UK economy may follow suit in the first half of 2024. At the same time, emerging market growth is expected to slow from 4.2% in 2023 to 3.9% in 2024 and 3.8% in 2025. In mainland China, authorities have been implementing loose policies for some time, and as they try to end the economy's dependence on the real estate industry, they are likely to further ease policies. Regarding global consumer price index (CPI), inflation is expected to slow from 4.4% in 2023 to 2.9% in 2024, before a slight rebound to 3.0% in 2025. However, the current slowdown in inflation is largely due to the diminishing impact of commodity prices, and not to significantly reduced pressures on related core prices, so difficulties in lowering inflation to target levels persist. The European Central Bank is expected to be the first major central bank in developed markets to start lowering interest rates, cutting rates by 150 basis points in the first quarter of 2024; by mid-2025, the deposit rate will be reduced to 2.5%. The Bank of England is expected to follow, with expectations of a 125 basis point cut to 4% by the middle of 2025. However, in comparison, Schroders believes that the Federal Reserve will be the last major central bank in developed markets to cut rates. Schroders has delayed its expectations for a shift in the Fed's stance and anticipates the Fed's first rate cut in September 2024, ultimately bringing rates down by 200 basis points to 3.5% by 2025.