The world is closely watching the trend of rate cuts, with Semafor Signals providing valuable insights into the latest developments. This week’s decision by Canada and the European Central Bank to cut rates has sparked a crucial debate about whether this trend will continue. In the beginning of the year, economists predicted that the US Federal Reserve would start cutting rates in March, with other major economies following suit through the summer. However, due to sticky inflation, the US rate cut was delayed until September at the earliest, leading the ECB to take an unprecedented step and cut rates ahead of the Fed.
The International Monetary Fund has forecasted global economic growth of 3% for this year, highlighting its surprising resilience despite challenges such as disinflation paths among major economies and prolonged high interest rates. Despite this, economists believe that more accommodative monetary policies are on the horizon as disinflation continues to push global inflation lower. However, a challenge to this expansion is posed by divergence in disinflation paths among major economies and prolonged high interest rates.
In Britain, Prime Minister Rishi Sunak’s decision to call a July election has raised questions about its timing. Some argue that waiting until the fall would have given Sunak a better chance of seeing a rate cut before the election. However, The Guardian’s economics editor believes that delaying the rate cut would only postponed the inevitable as economic recovery alone may not be enough for Sunak to win amid strong anti-incumbency sentiment. Additionally, strategists at TD Securities predict that a September rate cut in UK is not guaranteed as Taylor Swift’s upcoming London shows in August could lead to a surge in hotel prices, increasing inflation and possibly delaying another rate cut.
Overall, these developments suggest that while there may be some hesitancy among central banks to make rate cuts this summer due to concerns over inflation and other factors such as political events like elections or concerts in London shows; it appears clear that more accommodative monetary policies are on their way as disinflation continues to push global inflation lower.
