By Alun John, Naomi Rovnick and Samuel Indyk
LONDON (Reuters) – The Bank of England wrapped up a big year of central bank rate cuts by keeping rates steady on Thursday, a day after the Federal Reserve eased policy but suggested it would be more cautious in 2025.
Seven of the world’s 10 major, developed-market central banks cut rates this year, with only Australia and Norway still on hold. Japan, the outlier, is in hiking mode.
1/ SWITZERLAND
The Swiss National Bank, which has been at the forefront of monetary easing, cut rates by an unexpectedly large 50 basis points (bps) to 0.5% last week, the lowest since November 2022 and the bank’s biggest reduction in almost a decade.
Swiss annual inflation was most recently reported at just 0.7% and the SNB, which is alert to the safe-haven Swiss franc strengthening beyond levels domestic exporters can bear, said it could reduce borrowing costs again next year.
2/ CANADA
The Bank of Canada also cut rates by 50 bps to 3.25% last week, marking the first time since the COVID-19 outbreak that it has implemented consecutive half-point cuts.
It indicated further easing would be gradual after annual inflation accelerated to 2%, but with Canada’s weak economy threatened by U.S. President-elect Donald Trump’s proposed tariffs, markets placed 50% odds on a 25-bps cut next month.
3/ SWEDEN
Sweden’s Riksbank cut rates by a quarter-point to 2.5% on Thursday, in line with expectations, but signalled it can slow its easing pace in early 2025 after 150 bps of cuts so far this year.
The central bank said it favours a more tentative approach – noting that monetary policy affects the economy with a lag.
4/ NEW ZEALAND
New Zealand’s economy sank into recession in the third quarter, Thursday data showed, a dire result that cements the case for more aggressive rate cuts.
The Reserve Bank of New Zealand next meets in February and its governor says there is scope for a 50-bps cut.
It has lowered its cash rate by 125 bps to 4.25% so far this cycle and markets are pricing around another 100 bps of cuts by the middle of next year.
5/ EURO ZONE
The ECB is firmly in easing mode, cutting its deposit rate by 25 bps to 3% last week in its fourth such move this year and keeping the door open to further reductions.
It also signalled that further cuts are possible by removing a reference to keeping rates “sufficiently restrictive”, economic jargon for a level of borrowing costs that curbs economic growth.
Markets price in roughly 110 bps worth of further tightening by end-2025.
6/ UNITED STATES
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2024-12-19 06:48:27
