The 24 hours of rate cuts that end year of global central-bank easing

By Friday, 22 central banks accounting for two-fifths of the global economy will have set borrowing cost

By Craig Stirling

 

A year when inflation subsided enough for monetary policy easing to start in most advanced economies is about to conclude with a 24-hour flurry of decisions led by the Federal Reserve.

 

The US announcement will take centre stage on Wednesday, followed by peers in Japan, the Nordics and, the UK  — amounting to half of the world’s 10 most-traded currency jurisdictions.

 

Those events will draw most attention among investors bracing for the last big week for monetary policy in 2024. By Friday, at least 22 central banks accounting for two-fifths of the global economy will have set borrowing costs.

 

While the Fed itself is poised to deliver a quarter-point rate cut, the dawn of 2025 and the prospect of inflationary import tariffs threatened by the incoming administration of Donald Trump may give officials pause about the pace of further moves.

 

The Bank of England, mindful both of the growth shock his trade policies could cause but also of lingering price pressures, is reducing borrowing costs only cautiously and is widely expected to keep them on hold on Thursday. 

 

The Bank of Japan having exited negative rates this year, will probably wait until 2025 before raising again. 

 

Elsewhere, key data on the health of China’s economy, a likely pickup in UK inflation and business surveys from the euro zone may be among highlights.

 

While the Fed’s preferred gauge of underlying inflation will be released at the end of the week, officials can take take some comfort in projections that price pressures are cooling.

 

The November personal consumption expenditures price index, excluding food and energy, will probably rise 0.2 per cent — the smallest advance in three months — economists forecast Friday’s report to show. The report is also seen showing solid consumer spending and income growth, suggesting a resilient economy.

 

In Canada, Finance Minister Chrystia Freeland will release a long-delayed Budget update amid speculation she has broken her promise to keep the deficit at or below Canadian$40.1 billion. 

 

The week will begin with a slew of data from China that will be closely monitored for signs that the world’s second largest economy is being lifted by government stimulus efforts. Industrial production and retail sales data will be key to watch. 

 

PMI numbers from Australia, India and Japan are also scheduled for release on Monday, to give another feel for growth in the wider region. 

 

Elsewhere in central banking, Pakistan is expected to start off the week with a rate cut after inflation eased, and on Wednesday the Bank of Thailand is projected to keep its benchmark rates unchanged at 2.25 per cent. 

 

Indonesia and the Philippines are both expected to cut borrowing costs by 25 basis points. 

 

Meanwhile, South Korea’s central bank vowed to stabilize financial markets and highlighted the importance of “uninterrupted implementation” of key fiscal and economic measures, in its first statement since lawmakers voted to impeach President Yoon Suk Yeol.

 

On Friday, the Bank of Russia may hike its rate as much as 200 basis points to a record 23 per cent, after data showed consumers price pressures persisting at more than twice the 4 per cent target.

 

In the euro area, survey indicators may focus investors looking at how fallout from political turmoil in France and Germany is impacting businesses. 

 

Turning south, data from Israel from Israel will likely show inflation accelerated to 3.6 per cent in November from 3.5 per cent a month earlier as the war in Gaza strains the economy and the government’s spending soars. That may see its central bank leave rates on hold until the second half of 2025.  

On the watchlist

 

Key economic, monetary policy developments expected by year-end

 

> US Federal Reserve: The Fed is expected to cut rates by a quarter-point, but inflation concerns from Trump's administration could affect future cuts

> Bank of England: The BoE is expected to hold rates steady, cautious about both growth and inflation pressures

> Bank of Japan’s: After exiting negative rates, the BoJ is likely to wait until 2025 for further rate hikes

> US, Canada: US data suggests cooling inflation, while Canada's Finance Minister releases a budget update amid concerns over trade

> China economic data: Key data on China’s industrial production and retail sales will be crucial for assessing the effectiveness of government stimulus

> Asia: PMI numbers from Australia, India, and Japan will give another feel for growth, central banks in Pakistan, Thailand, Indonesia, and the Philippines are expected to make rate adjustments

> Europe: The Bank of England, Hungary, and Czech Republic are expected to hold rates, while Sweden may cut again. Russia could hike rates by 200 bps to 23%