LONDON, Sept 12 (Askume) – Major central banks have continued to cut interest rates, with the European Central Bank on Thursday cutting interest rates by half in the second quarter of this year.
Half of the 10 major developed market central banks tracked by Askume have now begun easing policy, with the Federal Reserve likely to join the club next week.
Here’s where the key rate setters stand and what traders can expect next.
1/ Switzerland
The Swiss National Bank was the first Western bank to lower borrowing costs in March and cut interest rates again to 1.25% in June. And has expressed interest in continuing.
Futures markets expect another rate cut on September 26 to be certain, with a 28% chance of a 50 basis point (bps) rate hike, as annual inflation fell to 1.1% in August. Outgoing Swiss National Bank President Thomas Jordan believes the strong Swiss franc is a threat to exports.
2/Canada
On September 4, the Bank of Canada cut interest rates for the third consecutive time to 4.25%, nearly undoing the effect of the 25 basis point cut in October.
Canada’s economy is sluggish, with the unemployment rate rising to 6.6% due to strong population growth, and the Bank of Canada has expressed concern about inflation falling below its 2% target.
3/ Sweden
With inflation slowing amid continued growth and the economy weakening, the Riksbank began cutting interest rates in May and is expected to cut borrowing costs by at least 25 basis points on Sept. 25.
Swedish interest rates are at 3.5%, but annual inflation remains stable and below the Riksbank’s 2% target.
4/Eurozone
The European Central Bank cut interest rates again on Thursday amid falling inflation and economic slowdown in the euro zone . It has revealed little about its next steps, and investors are betting on steady policy easing in the coming months.
Money markets expect a further easing of about 40 basis points before the end of the year, with a probability of a further 25 basis points of easing in October at about 42%.
5/UK
The Bank of England is expected to keep benchmark borrowing costs at 5% on Sept. 19, following its first interest rate cut in August.
Stubborn services inflation suggests the Bank of England will slow down more slowly than the Federal Reserve and the European Central Bank. The market expects another quarterly interest rate cut in 2024, probably in November.
6/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 are predicting another quarter percentage point drop in October.
7/ United States
The Federal Reserve’s next interest rate decision will be announced on September 18, and the market is under pressure over the possibility of the first US interest rate cut since 2020.
Comments from policymakers showed cuts were being implemented, but they did not say these were necessary because the economy was heading into recession.
Money markets are more likely to see a 25 basis point rate cut next week, even as Wednesday’s data showed underlying inflation has stabilised.
Traders expect rate cuts of about 100 basis points by the end of the year, compared with a previous forecast of 75 basis points by economists polled by Askume.
8/Norway
Norges Bank adopted a positive stance at its meeting next week.
In August, the central bank kept interest rates steady at a 16-year high of 4.5% and said a tight stance would be needed “for some time” to curb inflation, which is still above the central bank’s 2% target.
Markets are fully embracing the first rate cut in December, meaning Norway’s easing cycle could begin after its rivals.
9/Australia
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 believes that the probability of a rate cut in December is not more than 50 per cent.
10/Japan
The exception is the Bank of Japan, which has raised interest rates twice this year because of rising inflation.
The July rate hike surprised markets, causing a sell-off in Japanese stocks and a rise in the yen. The Bank of Japan said it would take prudent steps to ensure volatile markets do not harm businesses. Interest rates are expected to remain unchanged at 0.25% next week. Markets and economistsDevelopment is expected to resume by the end of this year .
