Fitch interest rate forecast for central banks! What will happen to interest rates in 2024?

In a statement from Fitch, it was noted that interest rates at the end of this year will still remain well above pre-COVID-19 pandemic levels.

The statement indicated that following recent declines in inflation and "dovish" comments from the US Federal Reserve (Fed), no further interest rate hikes are expected from the Fed, the European Central Bank (ECB), or the Bank of England (BoE) in this tightening cycle, and it was noted that each bank is expected to implement 75 basis points of interest rate cuts by the end of 2024.

Stating that the change in interest rates will be widespread and that central banks in 19 of the 20 economies included in the Global Economic Outlook are expected to cut interest rates this year, the statement noted that only the Bank of Japan is expected to raise interest rates.

The statement mentioned that while the geographical breadth of the interest rate cuts will be impressive, their scale and pace will be moderate compared to the aggressive hikes of the last 2 years.

The statement recalled that the increase in policy rates during the recent tightening cycle was extremely rapid by historical standards, with the Fed and the BoE raising interest rates from their 2021 lows by 525 basis points and 515 basis points, respectively, and the ECB by 450 basis points.

Noting that cumulative cuts of 200 basis points, 175 basis points, and 150 basis points are expected from the Fed, the BoE, and the ECB, respectively, by the end of 2025, the statement conveyed that the Fed is not expected to cut interest rates before June or July of this year.

The statement pointed out that Fitch expects interest rate cuts to be slower compared to financial markets, noting that by the end of 2024, the Fed and the ECB are projected to cut rates by approximately 150 basis points, and the BoE by around 115 basis points.

In Fitch's statement, it was noted, "This reflects our view that sticky wage and services inflation will make central banks cautious about cutting interest rates too quickly."

News Source: AA