Global rate cut juggernaut is struggling to start

NEW YORK: Central banks cagey about joining the global interest rate cutting cycle may reveal themselves this week with a quartet of decisions in advanced economies.

Days after the Federal Reserve (Fed) pared back projections for US monetary easing this year, policymakers from the United Kingdom to Australia are likely to signal that they’re still not convinced enough about disinflation to start lowering borrowing costs themselves.

Such outcomes would reaffirm how June, originally pencilled in as a month-long opening ceremony to a series of global rate cuts, may increasingly turn out to be a widespread display of hesitancy.

While Canada did deliver the first such move of the Group of Seven on June 5, the European Central Bank’s reduction in borrowing costs a day later, accompanied by a higher inflation projection, showed limited enthusiasm for further easing.

At the Bank of England (BoE) on Thursday, a looming election and some lingering price pressures are adding to the case to wait at least until August before cutting rates.

Peers in Australia and Norway, also meeting this week, are in no rush to do so either, while half of economists surveyed reckon the Swiss National Bank (SNB) may avoid a second reduction for now following its bold move in March to ease before its neighbours.

Decisions elsewhere may showcase the different stages of global monetary cycles, with Brazil and Paraguay expected to keep borrowing costs on hold, and Chile anticipated to slow rate cuts.

“Major central banks look set to keep interest rates on hold, having looked more likely to cut only a few weeks ago,” said an economist.

“The BoE is almost certain to keep policy unchanged in June ahead of the UK election. It’s a closer call for the SNB.”

Elsewhere, US retail sales, a raft of Chinese data and inflation numbers from the UK and Japan will be among highlights for investors this week.

A week after a series of reports showed moderating US inflationary pressures, investors will get a look at fresh figures on consumer demand, the housing market and industrial production.

Fed officials also return to the public speaking circuit after pencilling in just one rate cut for 2024.

Minneapolis Fed president Neel Kashkari said on Sunday that the central bank is in a good position to take its time and watch incoming data before starting to cut rates.

Retail sales figures are projected to show shoppers reengaged somewhat in May after pulling back a month earlier, underscoring a resilient consumer.

Separate data are seen showing an increase in production at the nation’s factories, mines and utilities.

On Thursday, housing data may show a modest increase in May construction from a month earlier as builders adjust to swings in underlying demand while staying diligent on inventories.

A limited number of listings in the resale market, along with the recent rise in mortgage rates, is taking a toll on sales of existing homes.

On Friday, the National Association of Realtors is projected to report another decline in previously owned home sales.

Looking north, the Bank of Canada will release a summary of the deliberations that led it to cut rates this month, providing further insight into how policymakers reached the decision and the conditions for a rate cut at their next meeting on July 24.

Statistics Canada will publish population estimates for the first quarter, and retail sales data will also offer new insight into the strength of the Canadian consumer. — Bloomberg

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central bank , policy , interest rate , easing


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