Today: Jun 23, 2024

Central Banks Glide Through Tricky Terrain: Hikes to Cuts

1 min read

TLDR: Major central banks around the world have almost reached the end of their tightening cycle, having raised interest rates by thousands of basis points. However, contrary to market expectations, some central banks have pushed back against the idea of rate cuts in the near future. The European Central Bank (ECB) recently decided to keep interest rates steady and reaffirmed its commitment to targeting inflation. The Bank of Canada has also indicated a shift in focus towards when it can begin easing rates. Market expectations for rate cuts vary across countries, with the Federal Reserve, Bank of England, and the Swiss National Bank seeing bets for rate cuts, while the Bank of Japan has signaled that it may end negative interest rates.

The Federal Reserve is closely watching inflation data before deciding on rate cuts, while the Reserve Bank of New Zealand is expected to hold rates steady at its next meeting before potentially cutting rates in May. In the UK, market expectations for an early rate cut have been dampened by an uptick in consumer price inflation. In Canada, the Bank of Canada is looking at when to cut borrowing costs rather than whether to hike rates again. The ECB, Norges Bank, and Reserve Bank of Australia have left rates unchanged, with the ECB maintaining its commitment to fighting inflation. The Riksbank of Sweden has signaled potential rate hikes, but economists remain skeptical. The Swiss National Bank has no immediate plans for further rate hikes, and the Bank of Japan may soon end negative interest rates.

Major central banks have hiked borrowing costs by 4,015 basis points so far this cycle, with Japan expected to end its negative rate policy soon.