Will Global Liquidity Improve by 2025?

Macro expert Lyn Alden predicts a steady rise in global liquidity through 2025, albeit at a more moderate pace compared to previous years. Following a contraction in liquidity during 2022, Alden observes that the situation stabilized in 2023 and is set to recover gradually. This insight highlights the necessity of a balanced approach to financial markets, suggesting that growth in liquidity will be measured rather than abrupt.

How Do Interest Rates Affect Liquidity?

According to Alden, the low-interest rates seen in 2020 and 2021 spurred borrowing, but current rates are not achieving desired refinancing and investment levels. While lower interest rates typically boost liquidity, there is a noticeable shift towards long-term borrowing, influenced by prevailing economic conditions. Alden points out that short-term rate cuts have not significantly impacted enthusiasm for long-term loans:

The efficacy of lowering interest rates in promoting refinancing and investments may be overestimated.

What Should We Expect for Liquidity in 2025?

Alden asserts that liquidity will rise in 2025, though not dramatically. She stresses the importance of achieving sustainable growth in liquidity for economic stability, warning against expectations of an exuberant spike:

I do not foresee an explosive event in 2025; liquidity conditions will not reflect a steep rise.

Alden’s insights advocate for a strategic and cautious methodology in economic planning. Key takeaways include:

• Global liquidity is expected to rise moderately by 2025.
• Interest rates have a limited effect on stimulating long-term borrowing.
• Sustainable liquidity growth is essential for overall economic stability.

A balanced and thoughtful approach is vital for stakeholders as they navigate the complexities of the financial landscape leading into 2025.