Next week, central banks around the world will set their benchmark interest rates. There are a total of 22 central banks that determine monetary policy, representing about two-fifths of the global economy. This year, which saw most advanced countries begin monetary easing, appears to be ending with interest rate cuts.
First, the U.S. central bank, the Federal Reserve (Fed), is expected to hold the Federal Open Market Committee (FOMC) meeting on the 17th and 18th (local time) and cut the benchmark interest rate by 0.25 percentage points. The key issue is the direction of the revision to the dot plot, which reflects the FOMC members' interest rate forecasts. Market attention is focused on the pace of Fed's rate cuts next year.
Fed Chair Jerome reaffirmed his previous stance on the current U.S. economic situation at the 'DealBook Summit' hosted by the New York Times (NYT) in New York on the 4th, stating that the economy is "in an astonishingly good condition" and that this "provides the ability to approach (monetary policy) decisions cautiously."
David Wilcox, Director of U.S. Economic Research, said, "President-elect Donald Trump has promised a series of measures affecting inflation and economic activity, complicating the FOMC's work," and “Because monetary policy works with a lag, the Fed will evaluate the likelihood of Trump's various proposals being implemented and balance the risks when deciding on rates at future meetings.”
The Bank of England (BOE), the U.K. central bank, is generally expected to keep rates unchanged at its meeting on the 19th. The BOE has carefully cut rates considering both the growth shocks that may arise from President-elect Trump's trade policies and persistent inflationary pressures, and it is expected to continue this approach. This year, the BOE cut the benchmark rate by 0.25 percentage points in August and again by 0.25 percentage points last month.
The Bank of Japan (BOJ) is also expected to keep its benchmark interest rate unchanged at the monetary policy meeting scheduled for the 18th and 19th. The BOJ raised its benchmark rate for the first time in 17 years in March, ending its negative interest rate policy, and increased the rate from 0?0.1% to about 0.25% at the July meeting, but has kept it steady since then.
The Nihon Keizai Shimbun (Nikkei) reported that the BOJ is "taking a cautious stance in judging wages and prices" and that "there is a possibility of postponing a rate hike at the December meeting." It also noted the high uncertainty surrounding President-elect Trump's policies.
Wang Xin, Director of the Research Bureau under the People's Bank of China, said at an event on the 14th that "the People's Bank of China will timely cut interest rates and reserve requirement ratios next year," according to the China 21st Century Business Herald. The Chinese Party and government announced at the Central Economic Work Conference, the annual meeting held on the 11th and 12th to decide next year's economic policy direction, that they will expand fiscal deficits and issue ultra-long-term special bonds to support economic recovery, and continue liquidity supply policies such as interest rate cuts.
In the European region, central banks' interest rate decisions are expected to diverge. The Swedish central bank cut its benchmark rate by 0.5 percentage points last month but is widely expected to slow the pace and cut by 0.25 percentage points this time. In contrast, the Norwegian central bank is expected to keep rates unchanged as core inflation has stopped slowing after a year. The Russian central bank is likely to raise its benchmark rate by 2 percentage points to 23% as consumer prices continue to exceed twice the target rate (4%).
Earlier, the European Central Bank (ECB) cut its benchmark interest rate by 0.25 percentage points from 3.40% to 3.15% at its last monetary policy meeting of the year on the 12th. This marks the third consecutive cut since September. Some market participants expect the ECB to cut the benchmark rate by 0.25 percentage points at each of the four meetings scheduled through June next year.
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