Fed’s Rate-Cut Delay Won’t Hold Back the Tide of Global Easing

-- Global policymakers aren’t about to let the Federal Reserve’s delay in cutting interest rates distract them too much from their own easing efforts.Gavin Newsom Is Ready for the Biden Emergency

Easing throughout the advanced world is also turning out to be relatively unsynchronized. In Europe for example, the Swiss National Bank has already cut rates twice this year, the European Central Bank has moved once, the Bank of England has yet to do so and Norwegian officials just signaled that they’re unlikely to act before 2025.

Still, some officials have said it’s important not to overemphasize a few encouraging inflation prints. Fed Chair Jerome Powell has stressed policymakers will be relying on a range of data, including on the labor market and prices, as they decide when it will be appropriate to lower rates.“Inflation surprised to the high side early in 2024, and June’s dot plot showed one 25-basis-point cut this year. However, Powell has said ‘unexpected’ labor-market weakening could prompt faster cuts.

Wage growth, particularly in the services sector, is keeping consumer-price gains elevated and officials nervous about loosening monetary policy too hastily. Japan’s finance ministry has conducted the biggest ever intervention to support the yen in late April and early May. The June decision was complicated by the UK election on July 4, with party campaigns in full swing. Although the MPC said that that vote “was not relevant” to the decision, the timing was inconvenient.

In June, the Bank of Canada led the Group of Seven central banks into easing monetary policy, cutting the benchmark overnight rate to 4.75% after it saw mounting evidence of slowing price pressures. Many economists still see the PBOC lowering rates this year, but not until the Fed gives a clearer signal of rate cut plans.

Brazil is expected to keep borrowing costs steady through most of 2025 after policymakers unanimously voted to halt their easing campaign on June 19. Governor Elvira Nabiullina warned in June of the possibility of a “significant” hike at the July rate meeting if inflationary pressures don’t start to ease. Russia’s war in Ukraine continues to overheat the economy and stoke inflation, with persistent labor shortages fueling a salary race and government spending on the rise.“Markets are likely to pressure the Bank of Russia into hiking the policy rate as high as 18% over the summer — with swaps expecting rates to peak at 19% this year.

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