The headquarters of the central bank, the People’s Bank of China, photographed behind iron chains in Beijing on August 30, 2010.REUTERS/Jason Lee //File Photo Obtaining license rights
LONDON, Sept 4 (Reuters) – Central banks in major developed and emerging economies took a breather in August, further slowing the pace and size of interest rate hikes as divergent growth prospects and inflation risks cloud the outlook. did.
August is often a relatively quiet month for monetary policy decisions, but only four of the central banks that oversee the 10 most traded currencies held interest rate-setting meetings. Two of these countries, Norway and the UK, raised interest rates by a total of 50 basis points, the lowest since January. Australia and New Zealand have kept their standards unchanged, according to Reuters data.
The move equates to three rate hikes in six meetings in July, bringing the G10 central banks’ total since 2023 to 33 rate hikes, totaling 1,075 bps.
But the outlook is uncertain, with surprisingly resilient U.S. data contrasting with disappointing numbers in China and much of Europe, and markets looking for clues as to when major central banks will cut interest rates. I’m looking for.
“There is a silver lining to this downturn story. Inflationary pressures should further ease,” said Carsten Brzeski, global head of macroeconomics at ING. He added that while this is likely not enough for many central banks to bring inflation back on target, it should be high enough to reach a peak in policy rate hikes.
“Central bankers would be crazy to publicly call for a halt to rate hikes. They don’t want to increase speculation about when the first rate cut will occur,” Brzeski said. .
Across the developing world, further evidence has emerged that interest rate cycle shifts are well established in some regions. Brazil’s central bank began its rate cutting cycle with a more aggressive 50 basis point rate cut than expected. Latin America’s largest economy was followed by Chile in July and smaller compatriots Costa Rica and Uruguay in recent months.
China was the second of 18 central banks in developing countries surveyed by Reuters to cut interest rates in August, with 12 of them holding interest rate-setting meetings.
But other developing countries were far from cutting rates, grappling with weak currencies and stubbornly high inflation, forcing policymakers to raise rates rather than cut them.
Turkey implemented a massive 750bps interest rate hike in August, Russia raised its base interest rate by 350bps, and Thailand added 25bps.
Cumulatively, emerging markets have tightened interest rates by 2,850bps with 27 hikes since the beginning of the year, which is well below the pace and scale of 2022, when developing country central banks implemented 92 rate hikes to 7,425bps. .
On the easing front, emerging market banks have cut interest rates by 220 basis points in five cuts since the start of the year, the data shows.
With major central banks expected to maintain restrictive policies until 2024, analysts predicted that room for maneuver could be limited for many developing countries.
“Major central banks will maintain their restrictive policy stances through 2024,” said Madhavi Bokir, senior vice president of strategy and research at Moody’s.
“Central banks in advanced economies are still grappling with rising inflation, and given the uncertainty surrounding the outlook for U.S. interest rates, significant easing by central banks in emerging markets is unlikely.”
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Reporting: Karin Strohecker and Vincent Flasseur Editing: Tomasz Janowski
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