First Interest Rate Decisions of 2024 Revealed by Major Central Banks
Fed likely to start interest rate cuts in May meeting, whereas UK, Asian central banks leave rates unchanged
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In the initial monetary policy conferences of 2024, major central banks worldwide opted to maintain their policy rates, marking a departure from nearly two years of 'hawkish' policies. Despite the lingering impact of the pandemic on production and supply chains, coupled with rising geopolitical risks, central banks signaled the end of 'hawkish' strategies in their recent conferences.
The Federal Reserve (Fed) in the United States retained its policy rate at a 23-year high of 5.25% - 5.50%, citing steady economic expansion and robust employment gains. While there were speculations of a March rate cut, Fed Chairman Jerome Powell indicated that any reductions would likely occur later in 2024.
Meanwhile, the Bank of Canada kept its policy rate unchanged at 5%, emphasizing the continuation of monetary tightening. In Europe, the European Central Bank (ECB) and the Bank of England (BoE) maintained their policy rates amid economic uncertainties. ECB President Christine Lagarde highlighted weak short-term economic indicators, while BoE Governor Andrew Bailey expressed the need for more evidence before considering rate cuts.
Asian central banks, including the People's Bank of China (PBoC), Bank of Japan (BoJ), and Bank of Korea, also left interest rates unchanged. The PBoC reduced reserve requirements, while the BoJ signaled potential rate hikes in the future.
The Turkish Central Bank (TCMB) has been actively combating inflation, raising its policy rate from 8.5% to 45% since June. Despite a recent 250 basis points increase, the TCMB indicated that the required level of monetary tightening for disinflation had been achieved and would be maintained as needed.
Analysts anticipate that central banks worldwide may adopt a cautious approach, balancing the need for inflation control with economic stability in the face of evolving global conditions.
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