Global Rate-Hike Cycle Approaching Its Peak as Federal Reserve Nears End
Central banks worldwide have been on a tightening cycle for years, but signs of economic growth decreasing and financial-market tensions lingering suggest that the end of this cycle could be in sight. The Federal Reserve may pause after one more rate increase in May, possibly cementing a turn in the tightening process. While some central banks may continue drawing, a US gear shift could be an important signal to global peers.
Possible Hiatus in Global Tightening Cycle
The most aggressive global tightening cycle seen in decades could be coming to a close soon, with most central banks either reaching a peak or already done with interest-rate hiking. Some advanced-world officials could start pivoting towards rate cuts as soon as this year.
Global Rates Peak
Bloomberg Economics expects that the short-lived peak for global rates will be 6% in the third quarter, dropping to 4.9% by the end of next year.
Possible Standout from the Pack: Japan
As in previous cycles, Japan may stand out from the pack. Under newly installed Governor Kazuo Ueda, its rate—currently the lowest in the world—is anticipated to stay unchanged until next year, when an increase to zero is finally envisaged.
Related Facts:
– At least 20 of the 23 significant jurisdictions monitored by Bloomberg are projected to lower borrowing costs in 2024.
– A shift in gear for US monetary policy led by Chair Jerome Powell would be an essential signal to global peers.
– Overall, the European Central Bank and regional counterparts might keep going longer and even aspire to keep restrictive settings in place.
Key Takeaway:
The end of the global tightening cycle may be in sight, with the Federal Reserve potentially pausing after one more rate increase in May. While some central banks may continue tightening, a US gear shift could be an essential signal to global peers to follow suit.
Conclusion:
The most aggressive global tightening cycle seen in decades may be coming to a close soon, as signs of economic growth decreasing and financial-market tensions lingering suggest. The Federal Reserve could pause after one more rate increase in May, and an sUS gear shift could motivate other central banks to follow suit toward rate cuts. Overall, the end of the tightening cycle may signify a possible hiatus before monetary loosening comes into view.
