A shift in the monetary policy of the US Federal Reserve System (FRS) occurred in December, among the central banks of large developed economies, only one decided to increase, and the number of rate cuts is increasingly growing in emerging markets, Reuters reports today, December 25.
The eight central banks overseeing the ten most actively traded currencies met in December, and of these, only Norway’s central bank raised rates by 25 basis points.
Earlier this month, the European Central Bank (ECB), as well as financial regulators in the UK, Japan, Australia, Canada and Switzerland, decided to keep key rates unchanged, as did the Fed. However, recent policy changes from the US Federal Reserve have caught markets by surprise, raising expectations that interest rates will fall sooner and faster than previously predicted. Officials in Europe and elsewhere have dismissed those expectations, yet markets appear to be at odds with regulators over the timing of the changes, the British news agency said.
“A slowing global economy, easing inflation pressures and a cooling labor market will open the door to rate cuts by leading central banks next year,” predicts Dean Turner from USB Global Wealth Management, adding that maintaining rates at current levels will lead to a tightening of funding conditions in real terms.
According to Reuters estimates, in 2023, central banks of the world’s ten largest economies raised rates by a total of 1,200 bps. 38 rate hikes, less than half the 2,700 bps tightening seen in 2022, which saw 54 rate hikes.
Meanwhile, in emerging markets that have been ahead of both the tightening and easing cycles, rate cuts are gaining momentum. Five of the 18 emerging market central banks included in the Reuters compilation cut interest rates, the highest in three years.
Brazil, Hungary, Colombia and Chile continued to ease monetary policy, while the Czech regulator has just begun the cycle. The latest moves bring the total annual rate cut to 945 bps. in 18 steps, compared to 1.765 bps. rate cuts in 2022 in 11 steps. There will be more to come, analysts say.
However, both Russia and Turkey, under constant pressure on their currencies and persistently high inflation, remained in the rate hike regime, raising rates together by 350 bps, the publication said.
In total, emerging market central banks have tightened rates by 5,075 bps since the start of the year, compared with a 7,425 bps hike. for the entire year 2022.
As reported EADaily, The Board of Directors of the Bank of Russia on December 15, 2023 decided to increase the key rate by 100 bp, to 16.00% per annum. Current inflation pressures remain high. By the end of 2023, annual inflation is expected to be near the upper limit of the forecast range of 7.0−7.5%. At the same time, GDP growth in 2023, according to the Bank of Russia, will be higher than the October forecast and exceed 3%.
2023-12-25 10:41:00
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