Yahoo News is better in the appYahoo News is better in the app -- The new higher-for-longer stage of global monetary policy may last only until the early months of 2024 as central banks begin moving toward cutting borrowing costs.That’s the outlook foreseen by Bloomberg Economics, whose aggregate gauge of world interest rates is seen beginning a swift descent in the first quarter. In advanced economies, that shift will take only slightly longer to transpire before they too synchronize downwards.
The BE outlook points to a turning tide in the tightening cycle. It also highlights how the ultra-low-rate world that preceded it won’t be back any time soon, as the volatile era European Central Bank President Christine Lagarde terms as an “age of shifts and breaks” keeps officials wary of loosening too far.
Most Fed officials have said they expect to raise their benchmark lending rate once more this year, capping the most aggressive tightening campaign in nearly four decades. But further progress cooling inflation, along with tightening financial conditions, could give them pause over the coming months.
After 10 straight rate increases, the ECB is ready to take a break from hiking. Keeping borrowing costs at current levels for a “sufficiently long” time will make a “substantial contribution” to a speedy return of inflation to 2%, policymakers said after their latest decision. With inflation likely to remain above the bank’s 2% target during the quarter, economists expect the BOJ will need to raise its price forecasts again in October. The bank will also likely get an early glimpse at the direction of next year’s wage talks when the biggest union group unveils its negotiating stance in the coming weeks. The yen is another critical factor. Ueda could come under pressure to take action early if the currency continues to weaken.“The BOJ faces a dilemma.
Canada’s economy unexpectedly contracted in the second quarter as its heavily indebted households feel the pinch of one of the most aggressive hiking cycles in the history of the central bank. Further proof of fading excess demand led Governor Tiff Macklem and his governing council to hold borrowing costs steady at 5% when they met in September, but they threatened the possibility of further tightening to damp expectations for any near term rate cuts.
Inflation risks remained front and center of the RBI, forcing it to strike a hawkish tone for the fourth straight meeting last week as it kept key rates and stance unchanged to support growth. Governor Shaktikanta Das highlighted inflation as a “major risk” to stability and growth, a warning that coincides with the weakest monsoon rains in five years and a rise in crude prices.
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