Nearly all major central banks to cut rates in 2024: Fitch

Fitch Ratings expects major central banks to cut rates in 2024, with the Bank of Japan being the sole outlier.

“The pivot by central banks to policy rate cuts in 2024 will be widespread but it will not be steep,” the rating agency said in a report. “Rates at the end of this year will still remain far above pre-pandemic levels.”

Fitch expects the U.S. Federal Reserve, the European Central Bank and the Bank of England to each cut rates by 75 basis points before the year’s end, and for 16 other central banks in developed and emerging economies to cut as well over the same period.

Financial markets, however, expect “around 150 [basis points] of cuts by the Fed and ECB and around 115 bps from the BOE by end-2024,” the ratings agency said. Fitch’s more muted expectations reflect “our view that sticky wage and services price inflation will make central banks cautious about cutting too quickly.”

Fitch predicted that, among the 20 major central banks it examined, only the Bank of Japan will raise rates in 2024, to +0.1% from -0.1%, “as underlying inflation finally begins to build.”

A top Fed official said Tuesday that he is increasingly confident inflation will continue falling this year back to the Fed’s 2% target level. The remarks followed comments from other senior Fed officials that suggest the central bank remains on track to begin cutting its benchmark short-term interest rate, likely by mid-year.

Fitch does not expect the Fed to cut rates before June.

Melissa Shin

Melissa is the editorial director of Advisor.ca and leads Newcom Media Inc.’s group of financial publications. She has been with the team since 2011 and been recognized by PMAC and CFA Society Toronto for her reporting. Reach her at mshin@newcom.ca. You may also call or text 416-847-8038 to provide a confidential tip.