When will the world’s central banks cut rates in 2024?

As inflation loosens its grip in most economies, investors are closely monitoring interest rate decisions, with markets expecting a series of rate cuts this year.

While rates in most economies are expected to remain high in 2024, economists expect a slight slowdown towards the end of this year, the Economist Intelligence Unit said in a recent report. Most central banks have raised policy rates sharply since the start of 2022 in a bid to stifle inflation.

China and Japan remain exceptions in the global tightening cycle, although Beijing’s rates have started to ease slightly, the global intelligence firm said. The EIU also expects the Bank of Japan to abandon its negative interest rate policy in the second quarter.

The central bank acknowledged that inflation was falling faster than expected and lowered its annual inflation forecast from an average of 2.7% to 2.3%. The ECB has an inflation target of 2%.

Swiss inflation in February rose 1.2% from a year ago, the lowest level in nearly two and a half years, raising hopes that the Swiss National Bank may cut interest rates at its March 21 meeting .

The SNB’s current key rate is 1.75% and the central bank has an inflation target of between 0% and 2%. According to LSEG, there is a greater than 40% chance of a 25 basis point cut in March, which would bring the SNB’s key rate to 1.5%.

UBS expects the SNB to wait until the second quarter for the first cut in benchmark interest rates, while not ruling out the possibility of a cut this month.

Turkey’s central bank held the interest rate stable at 45% in February, ending the tightening cycle after eight consecutive hikes, and many expect it to remain unchanged through much of 2024. The country’s inflation currently hovers around 65%.

JPMorgan said in a research note that Turkey’s central bank may cut its key rate in November and December, keeping its year-end policy rate forecast at 45%.

In a recent note, ANZ noted that the Australian economy experienced a “continued slowdown” in the second half of 2023, as fourth-quarter GDP grew just 0.2% compared to the previous quarter. This comes after third-quarter GDP increased 0.3% from the previous quarter.

Auckland Savings Bank does not expect the RBNZ to start cutting interest rates before November.

Indonesia’s central bank kept its key rate at 6% at its recent meeting.

While the Southeast Asian nation’s consumer price inflation is now within the Bank of Indonesia’s target range of 1.5% to 3.5% for the year, the bank’s governor Central Indonesia is considering a cut of 75 basis points only in the second half of the year.

“We are still carefully watching the global fallout… especially the impact of the direction of U.S. monetary policy,” Indonesian Bank Governor Perry Warjiyo recently told CNBC’s JP Ong.

BMI, a research unit of Fitch Solutions, expects the bank to lower its policy rate to 5% by the end of 2024, starting in the second half of the year in tandem with U.S. and other central bank markets developed “so as not to increase undue downward pressure on the Indonesian rupiah.”

Unlike its peers, economists expect the Bank of Japan to raise interest rates this year instead of cutting them.

The BOJ is expected to move towards ending its negative interest rate policy by April, contingent on annual wage negotiations, economists at Oxford Economics and Macquarie said.

The spring wage talks are an important factor in whether Japan’s inflation has sustainably reached the BOJ’s 2% target, a prerequisite for the BOJ to end its negative rate policy.

The BOK could still be one of the first in Asia to cut rates, said Goohoon Kwon, senior Asia economist at Goldman Sachs, citing ongoing disinflation and subdued private consumption.

A strong rebound in semiconductor-led exports due to the advent of artificial intelligence will allow the BOK to be less constrained by U.S. monetary policy and inflation, Kwon said.

“The Bank of Canada is my candidate to be the first to cut,” Carl Weinberg, chief economist at High Frequency Economics, told CNBC. He explained that the Canadian CPI, excluding housing prices, is increasing by only 1.7%. This is lower than the central bank’s inflation target, and Weinberg noted that all prices the BOC can control in the economy are rising less than the inflation target dictates.

“2024 will be the rate cut pivot year,” Weinberg added.

But Asian central banks are unlikely to cut before the Fed as a strong U.S. dollar means most Asian currencies remain relatively weaker, Morgan Stanley said.

The potential for further depreciation could still lead to higher inflation risks for these countries, economists at the investment bank said in a report.

“Although inflation is falling, in most economies in the region it has just reached the target range or is still closing the gap to the target range,” Morgan Stanley said.