The year is drawing to a close and as is customary, the deluge of annual outlooks has begun. Everyone from wealth managers to equity brokers, economists to sell-side analysts are making their projections for 2025. While markets are awash with prophecies, it is the projections from policy makers that truly matter, and the US Federal Reserve’s predictions next week are keenly awaited.

Year of Predictions

The World Gold Council anticipates that gold may not glitter as brightly in 2025 as it did this year. While geopolitical uncertainties will always keep the yellow metal as a hedge, the resurgent US dollar presents a strong alternative safe haven asset, especially backed by attractive US interest rates and bond yields. Bond investors like Pimco believe the US yield curve will steepen, favouring medium-term bonds, while JP Morgan cautiously expects 2025 to be the year of US Fed rate cuts, advising against excessive optimism. Goldman Sachs projects Fed rates at 3.25-3.50 percent, while Citibank is more conservative at 3.5-4.0 percent. The consensus points towards a robust US economy and measured rate cuts.

US Fed and the World

For emerging markets, including India, a strong US economy and higher US interest rates spell capital flight. As dollars flow back to the US, emerging economies face exchange rate pressures and potential asset price corrections. Equity markets are already hinting at this scenario. Axis Bank’s chief economist, Neelkanth Mishra, foresees a cyclical slowdown for India, with volatile exchange rates and a modest 7 percent GDP growth, anticipating no rate cuts from the Reserve Bank of India (RBI). This contrasts with Nomura analysts who expect deeper rate cuts, citing weakening consumption and robust farm output impacting inflation. The RBI’s recent policy statement, with raised inflation forecasts and lowered growth projections, offers little comfort. The forthcoming monthly bulletin from the RBI should provide a clearer picture of their 2025 outlook.

Bajaj Finance AI Pivot

Amidst these broader economic forecasts, individual companies are also adjusting strategies. Bajaj Finance, a major non-bank lender, is revising its five-year plan, BFL 3.0. The focus is shifting from aggressive expansion in payments and credit cards to profitability, driven by artificial intelligence (AI) and operational efficiency. Bajaj Finance is scaling back its payments business ambitions, aiming for just 1% market share in gross merchandise value by FY29, down from a previous 3% target. They are also exiting co-branded credit card partnerships due to unfavourable RBI regulations. Instead, the company is betting big on AI, aiming to double assets under management to ₹8 trillion and expand its customer base to 200 million by FY29, using AI to improve customer conversion, reduce costs, and refine credit risk assessment.

Fickle Forecasts

While these economic and corporate forecasts dominate headlines, another significant development in global finance is quietly taking shape. Veteran banker KV Kamath revealed the existence of a BRICS currency reserve, a ‘parallel IMF’ designed to support BRICS nations during crises, reducing reliance on Western-dominated institutions. This, along with the success of the New Development Bank (NDB), underscores a shifting global financial order where emerging economies are building independent systems.

As we absorb the multitude of 2025 forecasts, it is wise to remember that only the holiday list for next year is certain. The economic and market predictions are far more fluid. Investors would be prudent to focus on long-term value and resilience rather than get swayed by short-term forecasts, however compelling they may sound.