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Macro expert Lyn Alden forecasts that global liquidity will continue to rise until 2025, but in a more balanced manner compared to previous years. Alden notes that after the liquidity contraction experienced in 2022, liquidity stabilized in 2023 and 2024, emphasizing that this recovery will proceed gradually. Her analyses underline the importance of a balanced approach to financial markets, indicating that the expected growth in 2025 will be measured. Alden remarked, “2022 was indeed a challenging year for liquidity. In 2023 and 2024, liquidity stabilized and is gradually recovering.”
Impact of Interest Rates on Global Liquidity
Alden explains that the low-interest rates of 2020 and 2021 encouraged borrowing; however, these rates are currently failing to stimulate the desired levels of refinancing and investment. While declining interest rates lead to increased liquidity, investors are reportedly shifting towards long-term borrowing based on economic conditions. Alden also highlighted that short-term interest rate cuts have not significantly influenced interest in long-term borrowing:
Lowering interest rates may not be as effective in promoting new refinancing and investments as we expect.
Balanced Liquidity Expectations for 2025
According to Alden, liquidity will continue to increase in 2025, but a dramatic rise is not anticipated. She emphasizes that sustainable and balanced liquidity growth is crucial for economic stability. Maintaining such controlled levels of liquidity can contribute to steady economic growth:
I do not expect an explosive 2025. I believe liquidity conditions won’t resemble a steep liquidity party.
In conclusion, Alden’s analyses suggest that a more cautious and balanced approach should be adopted in economic planning. Stakeholders should act strategically, considering the moderate increase in global liquidity.
