US Federal Reserve Chair Jerome Powell.
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There are now more central banks cutting rates than those hiking rates, per a Deutsche Bank analysis.However, there may not be a big easing cycle unless the US enters a recession.The Fed has held rates steady since July after 11 hikes since March 2022, stoking speculation it’s pivoting from its tightening cycle.
Central banks around the world have been hiking interest rates relentlessly in the last 18 months to tame inflation — but some are now cutting them.
For the first time since January 2021, there are more central banks cutting rates than those hiking them, according to a report released by Deutsche Bank research strategist Jim Reid. Business Insider viewed the report, which was released on Tuesday.
The trend started last month, with 10 central banks cutting rates — outnumbering those that hiked rates in the same time period, according to Reid’s analysis of 81 central banks around the world.
The trend continued this month with five central banks — including include those in Brazil and Peru — cutting rates so far.
While major central banks like the US Federal Reserve and the European Central Bank are keeping rates steady right now, there are bets that they, too, will start to hike rates in the months ahead.
Swiss bank UBS, for one, said last week it’s expecting the Fed to slash rates as the US economy enters a recession around the second or third quarter of next year.
A global trend in interest rate cuts would bring relief to debtors as it would make the cost of borrowing for anything from mortgages to credit cards lower.
However, the Fed may not be slashing interest rates, Reid added in his note.
“I would say that unless the US sees a recession, it will be tough to see a big imminent global easing cycle,” Reid wrote, per MarketWatch. This is because inflation is still around target levels across major economies, he added.
The Fed has raised interest rates 11 times since March 2022 to cool soaring inflation that rose 3.2% in October from a year ago. That’s still above the Fed’s 2% inflation target.
“The interesting thing at the moment is that cuts are priced in on a soft-landing scenario,” Reid wrote. “So, I think they might be right for the wrong reasons, and eventually you’ll see more cuts than are priced in due to a harder landing than is priced. Interesting times ahead.”