Global central banks pause, markets predict rate cuts

Following an extended period of combating high inflation through historic monetary tightening, major central banks have temporarily halted ir drive to raise interest rates, with trers anticipating swift rate reductions on horizon. However, a few central banks in last few days have alluded to possible rate cut cycle to begin by second half of next fiscal.  On or hand, a rate increase by Norway shocked markets. Collectively, major rate setters have increased borrowing costs by 4,015 basis points during this cycle, with Japan being lone exception, holding its dovish stance.

Rate Hikes Overview:

1) United States: Fed's decision to maintain its key rate at 5.25 per cent to 5.5 per cent and announcement of officials' unexpectedly dovish forecasts for 2024, projecting 75 basis points of cuts, infused optimism in markets. Powell signalled that a forthcoming period of aggressive tightening by influential central bank was coming to an end, leing markets to anticipate a drop of around 150 bps by next December.

2) New Zealand: Reserve Bank of New Zealand maintained its interest rate at a 15-year high of 5.5 per cent in November, revising its peak rate forecast to 5.69 per cent. Market expectations lean towards cessation of hikes, with easing possibly as early as May.

3) Britain: Bank of England's stance against market speculation on rate cuts kept its key rate at a 15-year high of 5.25 per cent. While this tempered rate cut predictions, markets still foresee over 100 bps of easing in coming year.

4) Cana: In early December, Bank of Cana retained its benchmark rate at a 22-year high of 5 per cent, leaving room for anor hike due to improved financial conditions but remaining vigilant about inflation concerns.

5) Euro Zone: ECB is anticipated to le charge in rate reductions next year as economic prospects dim. It kept its deposit rate stable at 4 per cent, signalling an early conclusion to its bond purchase scheme and concluding a dece-long initiative to acquire debt across euro zone.

6)Norway: Norges Bank raised its key rate by 25 bps to 4.50 per cent in a decision that surprised markets, ding it would likely stay put for some time from here. While core inflation in November at 5.8 per cent was below central bank's 6.1per cent forecast, Norwegian crown has tred consistently weaker than it expected, potentially stoking inflation.