The global rate-cutting cycle has started
While the Fed has been slow to act, some central banks have already started to act. In its latest report, Nomura pointed out that the global rate-cutting cycle is already underway, with more than a dozen major central banks cutting rates.
Nomura said that this is an unusual cycle, and although some central banks were hesitant at the beginning, other central bank actions have been decoupled from the Fed given the local economic outlook.
Nomura expects that between now and the end of June, the European Central Bank, the Swiss National Bank, the Bank of Canada, the National Bank of Poland will cut interest rates, and many other central banks will take a dovish stance.
Nomura pointed out that the ECB is expected to lead the Fed in starting to cut interest rates in June this year, with four 25 basis point cuts throughout 2024, and interest rates will fall to 3% by the end of this year; the Fed will make its first rate cut in July, cut interest rates twice this year, and the interest rate is expected to be 4.88% at the end of 2024.
As the global rate-cutting cycle accelerates, a comparison of core CPI inflation, Sahm rule recession risk indicators and actual policy rates highlights that some central banks are slower than others in starting to cut interest rates.
Nomura said that based on all three indicators, the Bank of Canada appears ready to start cutting rates, as do the Reserve Banks of New Zealand and South Africa. Brazil and Mexico still have very high real rates and appear to have a lot of room to cut rates as the global rate-cutting cycle expands.
