This week, after the central banks of Canada and the Eurozone cut interest rates, following actions by Switzerland and Sweden, the era of monetary easing among major global economies has begun.
During the most aggressive tightening cycle in decades, central banks hiked rates rapidly and significantly. However, the upcoming rate cuts may present a different scenario. With inflation still relatively high overall, major central banks remain cautious about their future monetary policies, and market expectations for future rate cuts are continuously evolving.
After Sweden, Switzerland, Canada, and the Eurozone, the focus now shifts to the United States and the United Kingdom, which are expected to cut rates in September. Norway, New Zealand, and Australia may not cut rates until the end of the year or even next year.
Here are the latest developments and rate cut expectations for major central banks:
The Federal Reserve has maintained rates between 5.25% and 5.5% since July 2023 and is expected to keep rates unchanged at its meeting on June 12.
Recent weakening in U.S. inflation and employment data has increased expectations for a rate cut by the Fed. Additionally, global rate cuts, particularly by the ECB, could put pressure on the Fed. If the ECB’s rate cut strengthens the Euro, maintaining the current rate may negatively impact the U.S. economy.
The market currently expects the Fed to cut rates in September, with a total cut of 44 basis points for the year, significantly less than the 150 basis points expected at the beginning of the year.
After 14 consecutive rate hikes, the Bank of England has kept rates at 5.25%, the highest level in sixteen years.
The Bank of England will hold a monetary policy meeting on June 20, and the market currently expects it to maintain the status quo. Prime Minister Rishi Sunak announced general elections on July 4, and the Bank of England is expected to take action later in the summer, with September seen as the most likely time for a rate cut.
Last month, the Reserve Bank of New Zealand kept rates unchanged at 5.5% for the seventh consecutive time.
Despite a slowing economy and labor market, the RBNZ still prioritizes fighting inflation.
Inflation in New Zealand remains high at around 4%. The RBNZ expects inflation to fall to the target range of 1-3% in the fourth quarter of this year, later than previously expected. It is forecasted that the RBNZ will begin cutting rates later this year, but some economists believe it may not happen until the first or second quarter of next year.
The Reserve Bank of Australia has kept rates at a 12-year high of 4.35% since November last year.
Consumer inflation in Australia unexpectedly rose to 3.6% in April, reaching a five-month high. The market expects the RBA to start cutting rates until 2025.
These are just some of the major central banks and their current monetary policy stances and future rate cut expectations.