Global Interest Rate Moves Becoming More Divergent

Fitch Ratings – The direction of monetary policy moves is diverging among the major economies, after a period of unusually synchronised interest rate rises in 2022 and 2023, as highlighted in Fitch Ratings’ latest ‘20/20 Vision’ chart pack.

The Swiss National Bank (SNB) became the first major developed-market central bank to embark on an interest rate-cutting cycle. Meanwhile, two emerging-market central banks – Banxico and Central Bank of Brazil – both cut rates in 1Q24, as inflationary pressures continued to ease.

SNB cut its policy rate in March by 25bp, to 1.50%, its first rate cut since December 2014 – when the policy rate was moved into negative territory. At the same time, Central Bank of Mexico cut its target rate by 25bp, to 11.00%, for the first time since February 2021. As such, it joined the Central Bank of Brazil, which started its policy-easing cycle in August 2023 and lowered its Selic target rate twice in 1Q24 – in February and March – by a cumulative 100bp, to 10.75%.

By contrast, two Asian central banks – in Japan and Indonesia – recently raised their policy rates. The Bank of Japan took its policy rate out of negative territory in March and now targets a range of 0.0%-0.1%, as inflation is becoming more sustainable. Bank Indonesia lifted its benchmark rate by 25bp in April, to 6.25%. The Central Bank of the Republic of Turkiye increased its policy rate again in March – by 500bp, to 50.00% – amid a deteriorating outlook for inflation and depreciation of the lira. CPI inflation rose in March to 68.5% yoy and the lira reached a record high level exceeding TRY32 per dollar in April 2024.

Fitch’s bi-monthly ‘20/20 Vision’ chart pack covers the 20 major economies (the Fitch20) that are the focus of the Fitch Economics team’s global macro analysis, and plots five years of high-frequency economic data for 20 variables, with consistent coverage across each country.

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