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November 6, 2024 12:17 am

Global Markets Anticipate Central Bank Rate Cuts by Mid-Year

Navigating the Shift from Hikes to Reductions

In a pivotal shift, financial markets are now keenly focused on the timing for when major central banks around the globe will commence their move away from the historic rate-hiking cycle to start reducing interest rates. This anticipation stems from recent signals and actions by central banks, including the European Central Bank (ECB) and the Bank of Canada, which have begun to hint at easing inflation pressures, albeit cautiously approaching the idea of rate cuts.

  1. United States: The Federal Reserve is under close scrutiny as market expectations for rate cuts have adjusted from earlier predictions, with current forecasts suggesting around 90 basis points of reductions this year, anticipating a start around June. This follows comments from Fed Chief Jerome Powell, emphasizing that while rate cuts are expected, the trajectory of inflation remains uncertain.
  2. New Zealand: The Reserve Bank of New Zealand has moderated its previously hawkish stance, with its inflation outlook suggesting a reduced likelihood of further hikes in 2024. This adjustment has shifted market expectations, with policy easing not anticipated until November.
  3. United Kingdom: The Bank of England (BoE) presents an interesting case, with speculation about the timing and extent of rate cuts varying among investors. Despite current UK rates being at nearly 16-year highs, the BoE has softened its position on future reductions, with market predictions leaning towards a first cut in August.
  4. Canada: Holding its key rate steady, the Bank of Canada signaled it’s too early for rate cuts, citing persistent underlying inflation. Nonetheless, June remains the anticipated period for potential easing, as per market consensus.
  5. Euro Zone: The ECB’s recent decision to maintain borrowing costs but acknowledging quicker-than-expected inflation easing has fueled market speculation, with expectations now leaning towards 100 basis points of cuts within the year, eyeing June for the initial reduction.
  6. Norway: Considered potentially later to the game, Norway’s central bank has indicated borrowing costs might remain steady in the near term, with market predictions suggesting a rate cut in September.
  7. Australia: The Reserve Bank of Australia, maintaining rates but not ruling out further hikes, faces market skepticism, with expectations now favoring a rate cut in September, despite warnings of still high inflation.
  8. Sweden: The Riksbank’s openness to earlier rate cuts if inflation continues to decelerate has led to forecasts of easing potentially beginning in May or June.
  9. Switzerland: With Swiss inflation dropping, speculation is rife that the Swiss National Bank could lower rates as soon as its March meeting, amid market bets on a 50 percent chance of a cut from the current 1.75 percent rate.
  10. Japan: Standing out, the Bank of Japan is considering a rate hike, potentially ending its long-standing negative rate policy, with the upcoming meeting in March closely watched by markets and analysts.

As central banks globally navigate this delicate transition from rate hikes to potential cuts, financial markets remain attuned to each signal and statement, understanding the significant implications these monetary policy adjustments have on global economic health and investment strategies

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