Rate cuts gather steam in developed nations

With central banks of developed nations adopting a dovish stance, the global rate cut cycle is picking up steam, says a Reuters report, adding that the US Federal Reserve is setting up a move in September.

The Swiss National Bank in March implemented the first rate cut among developed market economies of this cycle and lowered borrowing costs again to 1.25 per cent in June. It is expected to cut again in September, as inflation has moderated to 1.3 per cent, which is within the SNB’s target range.

Traders widely expect more rate cuts from the Bank of Canada, which is shifting gear from suppressing inflation, to safeguarding the economy and has lowered borrowing costs by half a percentage point to 4.5 per cent since June.

Population growth has helped Canada avoid a recession, but driven unemployment higher, while previous rate hikes have dampened consumer spending and housing demand.

Sweden’s Riksbank ended a long era of monetary tightening in May, with its first rate cut of this cycle and stands ready to cut two or three times more after inflation cooled off and the economy contracted sharply.

The Bank of England cut interest rates from a 16-year high on Thursday, from 5.25 per cent to 5 per cent, after a narrow vote in favour from policymakers divided over whether inflation pressures had eased sufficiently.

The Bank of Japan is the outlier. The standout dove until last year, the BOJ, on Wednesday raised its key policy rate to 0.25 per cent from 0-0.1 per cent, levels unseen in 15 years, and unveiled a detailed plan to slow its massive bond buying programme.