(Finance) – The orientation of central banks towards i interest rate cuts in 2024 will be “geographically widespread, but will not be drastic” This was stated by Fitch Ratings in a report on the topic, explaining that rates at the end of this year will still remain well above pre-pandemic levels.
Following recent declines in inflation and dovish comments from the Fed, Fitch does not foresee further rate increases by the Fed, the ECB or the Bank of England (BOE) in this tightening cycle and each bank will cut by 75 basis points by the end of 2024.
The change in the direction of interest rates will affect 19 out of 20 central banks covered by Fitch’s Global Economic Outlook, with only the Bank of Japan which will raise rates. “The geographic breadth of rate cuts will be impressive, but their size and speed will be modest compared to the aggressive increases of the past two years, leaving rates well above pre-pandemic levels,” it said.
The increase in official rates recently The tightening cycle was extremely rapid by historical standards, with the Fed and BOE rising by 525 and 515 basis points respectively from the 2021 low, and the ECB by 450 basis points. Fitch expects cumulative cuts by the Fed, BOE and ECB of 200, 175 and 150 basis points, respectively, by the end of 2025. It does not expect rate cuts by the Fed before June or July 2024.
Additionally, Fitch expects a pace of rate cuts slower than financial marketswhich currently expect around 150 basis points of cuts by the Fed and ECB and around 115 basis points by the BOE by the end of 2024. “This reflects our view that the stickiness of wage and price inflation services will make central banks wary of cutting too quickly,” he said.