As the global trend of easing core inflation stabilizes, the ongoing interest rate cycle is entering its final stages. With 2024 on the horizon, central banks worldwide are shifting their attention from actively raising interest rates to determining the right moment to initiate reductions. How can we grasp the trends in interest rates in 2024? This article will introduce five key indicators.
1. Global - Proportion of Central Bank Interest Rate Hikes & Cuts
Looking back at 2022, facing continuous inflation pressures due to supply chain constraints, the Russia-Ukraine war, and an energy crisis, central banks worldwide initiated interest rate hike cycles. By Q4 2022, the global proportion of interest rate hikes climbed to a historic high of 86%. Currently, with inflation easing in 2023, most major global central banks, such as the Fed, ECB, and BoE, have begun to pause interest rate hikes. The proportion of interest rate hikes has significantly declined, while the proportion of interest rate cuts has gradually risen to over 30%.
2. Global - Central Bank Interest Rate Hike/Cut Expectations (2024)
Observing the chart, the current expectations for interest rate hikes/cuts in 2024 for major central banks are all negative and continue to show a downward trend. This reflects a shift toward moderate economic growth. Simultaneously, with increasing risks to the financial markets and rising government interest expenses in a high-interest-rate environment, central banks worldwide have begun to consider interest rate cuts.
Based on the prices of interest rate futures, estimates are calculated with the formula: Lowest Implied Rate for 2024 Q4 - Highest Implied Rate for 2022-2023 a negative value indicates that the market expects interest rate cuts in 2024. a positive value indicates that the market expects interest rate hikes in 2024.
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