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Chart of the week – Falling inflation sets up rate cut conundrum

chi lo
By CHI LO 19.12.2023

In this article:

    Inflation has been falling towards the policy targets of leading central banks after late summer/autumn peaks, with price pressures in Asia easing off by the most, as energy and supply chain shocks have subsided in many economies.  

    Implementation of particularly tight monetary policy by leading central banks since March 2022 looks set to crimp global growth in 2024. This leaves many investors asking when, and no longer whether, these banks will start cutting rates.

    The US fed funds futures market is currently pricing a high likelihood of a March 2024 cut from the US Federal Reserve, but forecasts from analysts for the date of a first easing of US monetary policy range from March 2024 to late in 2024.

    Arguably, there is no strong conviction in financial markets about the likely timing. It all depends on whether inflation continues to subside as rapidly as it has this autumn.

    To read more about the US Federal Reserve’s apparent pivot towards looser monetary policy in December 2023, click here.


    Please note that articles may contain technical language. For this reason, they may not be suitable for readers without professional investment experience. Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice. The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns. Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions). Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.

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