Central Banks in Easing Mode: A Global Overview

The major central banks of the developed markets are predominantly on a path of interest rate cuts, with expectations about their future direction fluctuating significantly. An analysis shows how the international monetary policymakers are currently acting and what the markets expect from them. The Swiss National Bank (SNB), thanks to the stable demand for the franc, has so far struggled less with inflation compared to other central banks. Currently, however, another challenge is at the forefront: prices are falling too sharply. This has given the SNB the leeway for an interest rate cut to 1% in September, and it is becoming apparent that further reductions could help exporters. The markets are pricing in a halving of rates by March 2025. In Canada, the monetary policy direction is also clear: market participants firmly expect another interest rate cut by the Bank of Canada at its meeting on October 23, with a 50 basis points reduction being considered. The inflation rate has fallen to 2%, and economic growth is stagnating. The Swedish Riksbank began cutting rates in May to boost economic growth. Following a reduction in September to 3.25%, the markets anticipate continuous reductions in the coming months to give the economy a boost. New Zealand has made it into the comfort zone, with an inflation rate of 2.2% for the first time since March 2021 within the target range. The Reserve Bank of New Zealand plans to continue aggressive rate cuts. In the Eurozone, the European Central Bank recently lowered its rates for the third time and plans to continue this measure in its upcoming meetings to stabilize growth. The U.S. Federal Reserve started its easing cycle with a significant rate cut and plans no further drastic measures for now, while the labor market remains stable. The Bank of England also recently cut rates, which reflects an increasing likelihood of further actions in the near future. In contrast, Norway’s central bank remains cautious. Despite a decline in core inflation, an interest rate cut is not expected before the first quarter of 2025 at the earliest. The Reserve Bank of Australia, however, keeps the possibility of rate hikes open, even though inflation has recently hit a three-year low. Japan is banking on stability, as the Bank of Japan, after a hike in July, is unlikely to make any further moves before the end of the year.