For the first time since January 2022, central banks in major developed nations did not raise interest rates in September, while emerging markets maintained their split between easing in Latin America and much of central Europe and tightening in Asia.
Five of the ten most heavily traded currencies’ central banks met in October, with policymakers at the Bank of Japan, the European Central Bank, the Reserve Bank of Australia, the Reserve Bank of New Zealand, and the Bank of Canada opting to keep their benchmarks unchanged, according to Reuters data.
There were no rate-setting meetings held by central banks in Sweden, Switzerland, Norway, the United Kingdom, or the United States.
In September, three major developed central banks issued a last-minute batch of rate hikes, bringing the year-to-date total for G10 central banks to 1,150 basis points (bps) across 36 hikes.
While inflation remained high in comparison to central banks’ forecasts, analysts warned that a quick recent rise in global bond rout has changed the backdrop dramatically due to the rise in rates at the long end of the yield curve across both developed and emerging nations.
“The higher yields may be doing some of the tightening work for the Fed, the Bank of England, and the European Central Bank, and a pause from central bankers to monitor the impact of previous hikes on the economy is increasingly likely,” said Fabiana Fedeli, chief investment officer at M&G Investments.
The Federal Reserve of the United States, which will publish its interest rate decision later on Wednesday, was most certainly nearing the end of its rate hike cycle, according to Fedeli.
Meanwhile, differing rate paths persisted in emerging nations, where 12 of the 18 central banks in the Reuters sample met in October.
Latin America and central and eastern Europe are leading the easing cycle, with Chile, Hungary, and Poland extending rate-cutting cycles to lower benchmarks by a total of 150 basis points (bps).
“Cuts are returning swiftly because the hiking cycle was arguably too fast and too furious for some,” said credit strategist Barnaby Martin of BofA Securities, adding that emerging markets last saw rate cuts similar to the current ones in the summer of 2020, when policymakers were dealing with the fallout from the COVID-19 rout.
Meanwhile, Asian central banks were still tightening, with Indonesia and the Philippines boosting rates by 25 basis points apiece. And, with their currencies under pressure due to individual events rather than the global context, Russia and Turkey lifted benchmarks by 200 bps and 500 bps, respectively.
In October, central banks in Brazil, Mexico, South Africa, Thailand, Malaysia, and the Czech Republic did not meet.
Rate hikes totaled 4,225 basis points this year, spread across 34 hikes, while rate cuts were 570 basis points spread across 11 moves.