current
Continued Monetary Easing
Most central banks are expected to continue cutting interest rates in response to slowing growth and moderating inflation, with the exception of Japan.
Timeframe
near-term
Categories
Impact areas
Detailed Analysis
The report anticipates a continuation of monetary easing by most central banks globally, driven by slowing economic growth and moderating inflation. The Federal Reserve is projected to cut rates to 3.25-3.5%, with sequential moves through Q1 2025. "We expect significant further rate cuts over the next year. The Fed is likely to cut to 3.25-3.5%, with sequential moves through Q1 and a slowdown thereafter." Similar easing is expected from the ECB and other central banks, particularly in emerging markets. A notable exception is the Bank of Japan, which is expected to *raise* its policy rate due to a pickup in inflation and wage growth, signaling a potential shift away from decades of deflationary pressures.
Context Signals
Inflation decline over the past two years
Strong real wage growth supporting real income
Easing financial conditions supporting demand
Edge
Divergence in monetary policy between Japan and other major economies could lead to increased volatility in currency markets.
The continued low interest rate environment could encourage further risk-taking in financial markets.
If inflation does not continue to moderate as expected, central banks may be forced to reverse course and tighten policy sooner than anticipated.
