Global Monetary Tightening Cycle Nears End as Emerging Markets Cut Rates

According to Yahoo News, the global monetary tightening cycle appeared to be nearing its end in November, as major developed central banks delivered only one increase, and the number of rate cuts surpassed hikes for the first time in 33 months across emerging markets. In November, six of the central banks overseeing the ten most heavily traded currencies held rate-setting meetings, with only the Reserve Bank of Australia raising rates by 25 basis points (bps). Policymakers in the United States, New Zealand, Sweden, Norway, and Britain chose to keep benchmarks unchanged at their meetings. This contrasts with October, when five of the major developed central banks met without delivering a single rate hike. The year-to-date rally stands at +1,175 bps across 37 hikes, according to Reuters calculations. While the rate hike cycle is undoubtedly winding down for major central banks as inflation slowly subsides and growth concerns increase, markets and policymakers seem to disagree on what will happen next. Traders have increased bets that big central banks such as the Fed and the ECB will cut rates in the first half of next year. However, others are more skeptical. Jean Boivin at BlackRock Investment Institute noted that inflation is expected to remain well above 2% central bank policy targets due to significant structural shifts such as slowing labor force growth, geopolitical fragmentation, and the low-carbon transition. This may prevent banks from pivoting as soon as some optimists hope. In emerging economies, the number of rate cuts exceeded rate hikes in November for the first time since February 2021 across the Reuters sample of 18 central banks in developing economies, 14 of which held rate-setting meetings last month.