As global economies navigate through persistent inflation and growth challenges, central banks are poised to make significant monetary policy decisions in the coming week. On December 18, 2024, the Federal Reserve is expected to announce a quarter-point rate cut, marking the conclusion of a year characterized by easing monetary policies in response to subsiding inflation. U.S. money markets currently show a 94% probability of this rate cut, with Generali Asset Management predicting that future easing may be slower as the Fed assesses economic conditions [ee7a1151][2e936527][13860d77].
In addition to the Fed's anticipated decision, other central banks are also set to announce their rate strategies. By December 20, 2024, a total of 22 central banks will set their borrowing costs, reflecting a broader trend among central banks to adapt to changing economic conditions [41c028ac]. The European Central Bank (ECB) and the Swiss National Bank (SNB) have recently reduced rates to address economic slowdowns. The Bank of Canada has already cut rates by half a point, while Mexico's central bank is expected to lower its rates to 10.0% as part of its ongoing economic adjustments [ee7a1151][2e936527][13860d77]. Meanwhile, the Bank of England is likely to maintain its rate at 4.75% amid ongoing inflation concerns, indicating a cautious approach to monetary policy [41c028ac][2e936527]. The Bank of Japan's meeting on the same day may potentially result in a rate hike to 0.50%, reflecting differing economic conditions across regions, although it is likely that the BoJ will postpone any rate hikes until early 2025 [b26714bd][13860d77].
As central banks globally grapple with inflation, key economic data releases are also on the horizon, including the November PCE inflation report, the Empire State Manufacturing Survey, and retail sales figures. These indicators will provide crucial insights into the economic landscape and may influence future monetary policy decisions [54b85e5f][2e936527]. In the context of the U.S. economy, inflation remains a significant concern, with the Federal Reserve's recent rate cuts being a response to a labor market that is showing signs of strain. The U.S. core Consumer Price Index (CPI) rose 3.3% year-over-year in November, underscoring the persistent inflationary pressures that central banks are facing [b26714bd][21f3610c].
In Europe, Christine Lagarde, the ECB president, has acknowledged the complexities of current economic structures, which complicate monetary policy assessments. The ECB is also expected to cut rates by 25 basis points on December 12, 2024, as part of its strategy to manage inflation and stimulate growth [21f3610c][fad1e8ab][6e4885e4].
As Australia and New Zealand await budget updates and economic growth figures, the global economic landscape remains dynamic. China's recent announcement of fiscal measures has been met with limited clarity, raising questions about the effectiveness of these strategies in stabilizing its economy [b26714bd]. Turkey is expected to cut rates by 250 basis points, while Brazil's central bank has raised rates to counter inflation, highlighting the mixed responses to inflationary pressures and growth slowdowns across different regions [41c028ac][2e936527].
As central banks prepare for their upcoming meetings, investors are closely monitoring these developments, which could have far-reaching implications for global markets, currencies, and economic stability. The interplay between U.S. treasury yields, the dollar, and commodities like gold and crude oil will also be critical as these decisions unfold [809d07c9][4866b4ae].