Askume LONDON, Sep 19 – The Federal Reserve cut interest rates by half a percentage point more than expected, joining the global easing cycle .
Seven of the 10 major developed market central banks tracked by Askume have now begun easing policy. Japan is an outlier, having started raising interest rates from very low levels.
Here’s where the key rate setters stand and what traders can expect next.
1/ Switzerland
The Swiss National Bank was the first among Western banks to cut borrowing costs in March and cut interest rates again to 1.25% in June. And has expressed interest in continuing.
After Switzerland’s annual inflation rate fell to 1.1% in August, the currency market expects another interest rate cut to be certain on September 26, with the probability of a 50 basis point (bps) rate cut estimated at around 30%. Outgoing Swiss National Bank President Thomas Jordan sees the strength of the Swiss franc as a threat to exports .
2/Canada
The Bank of Canada is expected to cut interest rates for the fourth consecutive time in October. A 25 basis point interest rate cut is absolutely certain, and the market has a probability of a further 50 basis point interest rate cut of about 60%.
Annual inflation has slowed to 2 per cent , and the Bank of Canada said price increases would fall below its target as the economy slowed and strong population growth pushed the unemployment rate up to 6.6 per cent.
3/ Sweden
The Riksbank began cutting interest rates in May as inflation eased amid continued growth but the economy weakened. Now, the bank is expected to cut borrowing costs by another 25 basis points on September 25.
Swedish interest rates are at 3.5%, but annual inflation remains stable and below the Riksbank’s 2% target.
4/Eurozone
As the euro zone economy faltered and inflation slowed, the European Central Bank cut interest rates again on September 12 , but did not reveal what steps it would take next.
Investors expect interest rates to be cut by about 40 basis points by the end of the year, with a 30% chance of a further 25 basis points cut in October.
5/UK
The Bank of England on Thursday cut its key interest rate to 5% from a 16-year high of 5.25% in August .
UK services sector inflation remains stable, meaning the Bank of England is expected to cut interest rates at a much slower pace than the United States or the euro zone.
The market expects interest rate cuts of about 40 basis points by the end of the year, with a 65% probability of a 25 basis point cut in November.
6/ United States
The Federal Reserve kicked off the easing cycle on Wednesday by cutting interest rates by 50 basis points , the first rate cut in four years.
Money markets are now pricing in a further reduction of about 70 basis points by the end of the year, leading traders to believe another deep rate cut is likely.
7/ New Zealand
The practice of releasing GDP and inflation data on a quarterly rather than monthly basis has confused the Bank of New Zealand and domestic market watchers.
In August, the Reserve Bank of New Zealand cut interest rates for the first time this cycle to 5.25%, a year earlier than expected. Markets anticipate another quarter-percentage point drop in October.
8/Norway
Norges Bank remains aggressive.
The crown got a boost after the regulator left the policy rate unchanged at 4.50% on Thursday and said any rate cut would have to wait until the first quarter of 2025.
The probability of a market reversal in December is around 70%, meaning Norway’s easing cycle could start later than other countries.
9/Australia
Australia was also included in the aggressive camp.
The Reserve Bank of Australia has kept interest rates steady at 4.35% since November and believes inflation remains stable despite data showing the economy is in trouble .
The market does not expect a rate cut until at least December.
10/Japan
Rising inflation forced the Bank of Japan to raise borrowing costs by 0.25% in July, a move that wreaked havoc on global trade based on excessively loose monetary policy.
The yen rose and Japanese stocks fell, with the Bank of Japan now keen to protect domestic industries from market turmoil , and agreeing on Friday to keep interest rates steady until at least October 2025.
