Fed’s rate cut delay will not hold back the tide of global easing
WASHINGTON - Global policymakers are not about to let the US Federal Reserve’s delay in cutting interest rates distract them too much from their own easing efforts.
Among the 23 of the world’s top central banks featured in Bloomberg’s latest quarterly forecast, only the Bank of Japan will not end up lowering borrowing costs within the next 18 months. Most are already set to do so in 2024.
In total, 155 basis points will be removed from an aggregate benchmark global rate compiled by Bloomberg Economics by the end of 2025.
Even the Fed itself, whose plans for cuts in borrowing costs went awry in the face of stubborn US inflation, will still end up delivering a couple of moves in 2024, the forecasts show.
What is clear by now is that prospects are dwindling for a swift removal of the unprecedented global tightening delivered during the post-pandemic cost-of-living crisis.
In tandem with the caution of their US peers, central bankers worried about lingering consumer price pressures are seen adopting a far gentler trajectory downwards for rates than they did on the way up.
Easing throughout the advanced world is also turning out to be relatively unsynchronised. In Europe for example, the Swiss National Bank has already cut rates twice in 2024, the European Central Bank (ECB) has moved once, the Bank of England has yet to do so and Norwegian officials just signalled that they are unlikely to act before 2025.
The global easing push could still suffer further setbacks, as the Fed and ECB have already shown. Australia’s central bank is not even ruling out another hike.
But with the second half of 2024 dawning, the prospect of looser constriction looks increasingly likely to materialise for much of the world.
As for the all-important Fed, officials have pencilled in one rate cut in 2024, according to the median projection released in June, and all eyes will be watching for clues about whether that could come during the third quarter, towards the end of 2024 instead, or perhaps even later.
Fed policymakers have been offering a cautious outlook about the timing for the start of easing after data in early 2024 stoked fears of stalling progress on lowering inflation. But some officials have highlighted more recent figures that suggest pressures are again weakening. A key measure of underlying growth in consumer prices slowed in May for the second straight month.
Still, some officials have said it is important not to overemphasise a few encouraging inflation prints.
Fed chair Jerome Powell has stressed policymakers will be relying on a range of data, including on the labour market and prices, as they decide when it will be appropriate to lower rates. BLOOMBERG