Between Inflation, Recession, and the Global Economy
The global economy is entering a fragile phase, with growth slowing, while the shadow of recession has not completely disappeared. The World Bank projects global economic growth of only around 2.3% in 2025, with a "sluggish" recovery in the following years.
In the United States, several models now assess the probability of a recession in the range of 20–40% by the end of 2025, indicating that downside risks remain real even though they are not yet a baseline scenario.
The IMF also warns that prolonged uncertainty, protectionism, and fiscal vulnerabilities could trigger further shocks to the global economy.
On the other hand, global inflation has indeed declined from its peak in the crisis, but has not yet comfortably returned to its target. The OECD noted that inflation in advanced economies remained at around 4.2% in 2025 and is only expected to ease further in 2026.
The latest report shows that inflation in the G20 group will fall from 6.2% to around 3.6% in 2025, but the United States is an exception, as inflation is expected to remain just below 4% and still above its target.
In Europe, inflation has returned to near 2%, prompting the European Central Bank (ECB) to hold interest rates after previously cutting a total of 200 basis points since 2024, marking a new phase in which concerns shift from high inflation to the risk of inflation becoming too low.
In this context, the debate over interest rate cuts is heating up at major central banks. The US Federal Reserve recently cut its benchmark interest rate by a quarter point to a range of 3.75–4.00% in late October and ended its balance sheet tightening, but officials are now divided over the need for further cuts in December.
Fed Governor Christopher Waller has openly pushed for another rate cut, citing a weakening labor market and significantly eased inflationary pressures. While other officials have opted for caution, especially given the economy's recent six-week US government shutdown, which wiped out billions of dollars in activity and disrupted official data.
In Europe, the ECB, which had already cut interest rates, is now signaling room for further cuts only if the risk of inflation becoming too low increases.
For developing countries like Indonesia, the dynamics of recession, inflation, and global rate cuts will determine the direction of capital flows, exchange rate movements, and commodity prices, which ultimately have a direct impact on domestic purchasing power and real activity.(cp)
Source: Newsmaker.id
