1) United States
On December 13, the Federal Reserve (Fed) buoyed market optimism by maintaining its key rate between 5.25% and 5.5%. Furthermore, officials shared remarkably dovish projections, suggesting a potential 75 basis points (bps) of cuts in 2024. Fed Chair Jerome Powell acknowledged that inflation was decelerating faster than anticipated, effectively confirming the conclusion of an era of forceful monetary tightening by the world’s most influential central bank.
2) New Zealand
In November, the Reserve Bank of New Zealand held its interest rate at a 15-year high of 5.5%. However, the bank surprised the markets by revising its rate peak forecast to 5.69%. Currently, the central bank is expected to refrain from further rate hikes, with the possibility of easing as early as May.
3) Britain
The Bank of England responded to speculation about potential rate cuts by maintaining its key rate at 5.25% during the most recent decision. The bank emphasized that rates would need to remain elevated for an extended period. This declaration prompted a reduction in market expectations for rate cuts, although they still anticipate more than 100 bps of easing next year.
4) Canada
The Bank of Canada, with its benchmark interest rate set at a 22-year high of 5%, chose not to make any adjustments on December 6. However, it did leave open the possibility of a future hike due to easing financial conditions and lingering inflation concerns.
5) Euro Zone
The ECB is anticipated to be among the first major central banks to commence rate cuts next year as the economic outlook deteriorates. During its most recent decision, the ECB kept its deposit rate stable at 4% and signaled an early conclusion to its bond purchase program. This marked the conclusion of a decade-long experiment aimed at reducing debt across the euro zone. Market projections currently indicate approximately 140 bps-worth of rate cuts in 2024.
6) Norway
Surprising the markets, the Norges Bank raised its key rate by 25 bps to 4.50%. The central bank also suggested that it is likely to maintain its position for the foreseeable future. Although core inflation in November fell below the bank’s forecast of 6.1% to 5.8%, the Norwegian crown has consistently depreciated more than expected, which may potentially contribute to inflationary pressures.
7) Australia
The Reserve Bank of Australia held interest rates steady at 4.35% in December, with market expectations leaning towards future rate cuts starting in mid-2024.
8) Sweden
Economists and traders believe that Sweden’s central bank has likely completed its rate hikes after maintaining rates at 4% in November. In November, Swedish inflation dropped to 3.6% year-on-year, a significant decrease from 10.2% in December 2022.
9) Switzerland
The Swiss National Bank held interest rates at 1.75% for the second consecutive meeting in December, aided by inflation remaining within the central bank’s target of 0% to 2% for the sixth consecutive month.
10) Japan
Governor Kazuo Ueda will strive to acknowledge inflationary pressures without indicating an immediate end to negative interest rates as the Bank of Japan concludes its two-day meeting on Tuesday. Over 80% of economists anticipate the BOJ to terminate this long-held policy next year, with many predicting a move in April. In October, the BOJ replaced the 1% cap on Japan’s 10-year bond yield with a flexible “upper bound,” allowing long-term borrowing costs to gradually increase.