Major central banks across developed economies did not deliver any rate hikes in September, marking the first time this has occurred since January 2022. However, emerging markets continue to diverge, with Latin America and parts of central Europe implementing easing measures while Asia tightens its monetary policy.
October witnessed rate-setting meetings for five central banks overseeing the 10 most heavily traded currencies. The Bank of Japan, the European Central Bank, the Reserve Bank of Australia, the Reserve Bank of New Zealand, and the Bank of Canada all chose to keep their benchmarks unchanged. On the other hand, central banks in Sweden, Switzerland, Norway, Great Britain, and the United States did not hold any rate-setting meetings.
This contrasts with September, when three major developed central banks performed last-minute rate hikes, bringing the year-to-date total for G10 central banks to 1,150 basis points across 36 hikes.
While inflation remains high compared to central banks’ targets, the recent surge in global bond yields has significantly altered the landscape. This rise in yields, particularly at the long end of the yield curve in both developed and emerging markets, has prompted analysts to suggest that higher yields may be taking some of the tightening burden off central banks. As a result, central bankers are increasingly likely to pause and assess the impact of previous rate hikes on the economy. Fabiana Fedeli, chief investment officer at M&G Investments, highlighted that the U.S. Federal Reserve is likely the closest to the end of its rate hike cycle.
In emerging economies, different rate trajectories are still evident. Of the 18 central banks in the Reuters sample, 12 held meetings in October. Latin America and central and eastern Europe are leading the easing cycle, with countries such as Chile, Hungary, and Poland lowering their benchmarks by a combined 150 basis points. Analysts suggest that the rapid return to rate cuts in these regions is due to the previous hiking cycle being considered too fast and intense. The last time emerging markets experienced rate cuts similar to the current ones was during the summer of 2020, when policymakers dealt with the aftermath of the COVID-19 pandemic.
Meanwhile, Asian central banks continue to tighten their monetary policy, with both Indonesia and the Philippines raising rates by 25 basis points each. Russia and Turkey, facing pressures on their currencies due to internal factors rather than the global backdrop, increased their benchmarks by 200 and 500 basis points respectively.
Central banks in Brazil, Mexico, South Africa, Thailand, Malaysia, and the Czech Republic did not hold meetings in October.
Throughout the year, central banks implemented a total of 4,225 basis points through 34 rate hikes, while also delivering 570 basis points of rate cuts across 11 moves.
More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )