ECB and Canada (and Denmark too) cut rates as easing among big economies gets going
Interest rate cuts from the European Central Bank and Bank of Canada this week mean monetary easing is under way in the world's big economies, even if there's an abundance of caution over when others will join in.
Following the most aggressive global rate-hiking cycle in decades, here's where leading central banks stand and what they are expected to do next:
SWITZERLAND
The Swiss National Bank lowered rates by 25 basis points (bps) to 1.50% in a surprise move in March. But its next move is a coin toss and markets put the chance of a cut at the June 20 meeting at about 50-50. While inflation is within the SNB's target range, SNB chairman Thomas Jordan has warned it may tick higher if the franc weakens and import prices rise.
SWEDEN
Sweden's Riksbank lowered borrowing costs to 3.75% from 4% in May and is expected to hold them steady at its June 26 meeting before embarking on small cuts from August.
Swedish inflation has dropped from a peak of more than 10% in 2022 to just above the central bank's 2% target, but the economy has rebounded from a slowdown in 2023 caused by price rises and rate hikes.
CANADA
The Bank of Canada became the first G7 nation to cut rates on Wednesday, trimming benchmark borrowing costs by 25 bps to 4.75% and promising more easing to come. The BoC's first cut in four years was widely expected after inflation hit a three-year low of 2.7% in April. Traders expect two more 25bp cuts this year.
EURO ZONE
The ECB cut rates for the first time in five years on Thursday, lowering its record-high deposit rate by 25 basis points to 3.75%.
But the ECB raised its inflation forecasts and stressed that any further rate reduction would depend on incoming data. It reaffirmed that borrowing costs needed to remain high enough to keep a lid on prices.
BRITAIN
The Bank of England is widely expected to hold rates at the 16-year high of 5.25% at its June 20 meeting and traders will be straining for any clues about what comes next.
This is the only event before the July 4 election when BoE policymakers will speak publicly. Traders, uncertain about how the election might sway BoE thinking and unsettled by hot services inflation, have scrapped earlier bets for a first cut in June or August. September is now seen as the most likely start date for easing.
UNITED STATES
The Fed has kept rates in the 5.25% to 5.5% range since July 2023 and appears unlikely to make changes at its June 12 meeting, while the world's largest economy stays strong and inflation remains above target.
A recent soft core inflation reading could tilt Fed policymakers towards a September cut, but they are expected to stay cautious after that. Traders, who back in January expected 150 bps of Fed cuts this year, now expect about 44 bps worth.
https://www.reuters.com/markets/rates-bonds/ecb-canada-cut-rates-easing-among-big-economies-gets-going-2024-06-06/
Denmark was first in the ZIRP game beating Japan as the first by a few months
Denmark Starts Easing Rates, Matches ECB’s Quarter-Point Cut
https://www.bloomberg.com/news/articles/2024-06-06/denmark-starts-easing-rates-matches-ecb-s-quarter-point-cut