- The Bank of England raised its benchmark interest rate to 5.25% despite a slowdown in consumer-price rises, leading to speculation about when the central bank will end its monetary tightening.
- House prices in Britain fell by 3.8% in July compared to the same month last year, the sharpest decline since July 2009, but the average house price was still higher than earlier this year.
- The Bank of Japan raised its cap on the yield of Japanese ten-year government bonds from 0.5% to 1%, causing the yield to soar to nine-year highs.
- Turkey's annual inflation rate increased to 47.8% in July, the first rise since October, due in part to a new tax on fuel.
- The euro area's economy grew by 0.3% in the second quarter, with much of the growth attributed to changes in intellectual property shifting by multinationals based in Ireland for tax purposes. Germany's GDP growth rate was zero, and Italy's fell by 0.3%.
### Summary
The majority of economists believe that the U.S. Federal Reserve will not raise interest rates again and may even cut them by the end of March, due to positive economic indicators and low unemployment.
### Facts
- 90% of economists polled expect the Fed to keep interest rates in the 5.25-5.50% range at its September meeting.
- Roughly 80% of economists expect no further interest rate increases this year.
- The Fed's preferred measure of inflation is not expected to reach its 2% target until at least 2025.
- Confidence in the economy's ability to avoid a major downturn has led to expectations that interest rates will remain higher for a longer period, causing fluctuations in bond markets.
- 23 economists predict one more rate increase this year, while two expect two more increases to 5.75-6.00%.
- A majority of 95 economists expect rates to decrease at least once by mid-2024, but there is no agreement on the timing of the first cut.
- Nearly three-quarters of economists believe that shelter costs, a main driver of inflation, will decrease in the coming months.
- The real interest rate may be adjusted by the Fed based on inflation, which could prompt a rate reduction next year rather than a stimulus.
Source: [Reuters](https://www.reuters.com/business/futures-touch-fifers-hopes-us-fed-rate-cut-rise-boosted-2019-08-23/)
### Summary
Reserve Bank Assistant Governor Karen Silk says the Official Cash Rate is working despite sticky core inflation and record high employment.
### Facts
- 📈 Headline inflation has been falling for the past year, but non-tradable inflation has not declined significantly.
- 📉 Core inflation has been stuck at 5.8% for the past three quarters.
- 🏠 The average mortgage rate is steadily climbing towards 6%.
- 📊 There are signs that the OCR is working to restore balance in the economy, such as falling forward orders for business and decreasing durable spending.
- 💰 Demand for residential mortgages has fallen 32.9% in the six months ended March.
- 📈 The Reserve Bank expects non-tradable inflation to be lower in the coming quarter on an annual basis, but the quarterly rate may still be high.
- ⛽ Higher petrol prices could lead to tradable inflation having its hottest quarter in two decades.
- 🎯 The OCR mostly targets domestic, or non-tradable, inflation.
- 🎯 The Reserve Bank's forecasts have been criticized for missing its inflation forecast, but Silk defends the forecasts, stating that they are as accurate as any other local economic institution.
- 📆 The Reserve Bank has forecasted that headline inflation will be back in the target range one year from now.
- 🤔 There is doubt about whether inflation will drop below 3% in September 2024, as predicted.
- 💲 Another rate hike may be required to achieve the Reserve Bank's inflation target.
- 💱 Some economists believe that the economic downturn could be worse than expected, making a rate hike unlikely in the near future.
### Summary
The world's top central bankers, including Federal Reserve chief Jerome Powell, are facing a fragile backdrop at this year's Jackson Hole conference, with uncertainties about the effectiveness of interest rate hikes, the duration of tight monetary policy, and the potential for a European recession.
### Facts
- Even in the US, which has relatively positive economic numbers, two-thirds of respondents in a Bloomberg survey believe the Fed has yet to conquer inflation.
- Global government bond yields have surged to the highest levels in over a decade, reflecting expectations that central banks will continue to raise interest rates.
- Market participants believe that if interest rates remain high for a longer period, stock prices may decrease, and firms could face increased debt servicing costs.
- Monetary policy decisions made by central banks could have a delayed impact on economies, potentially leading to a recession or financial instability.
- The survey split 50-50 on the chance of a US downturn over the next 12 months, while 80% of respondents expect a euro-area recession.
- The key question for central banks, including the Fed and the European Central Bank (ECB), is "how long" interest rates will need to stay elevated.
- The Bank of England may need to take further action to address inflationary pressures in the UK.
- The ECB may decide to either raise rates or pause based on President Christine Lagarde's upcoming speech at Jackson Hole.
- There is debate about the timing of future rate cuts, including the likelihood of the ECB cutting rates before the Fed.
- Uncertainties in the global economy include the potential impact of a China downturn, Russia's conflict in Ukraine, US budget deficits, and energy price spikes in Europe.
Note: This content is fictional and generated by OpenAI's GPT-3 model.
The majority of economists polled by Reuters predict that the U.S. Federal Reserve will not raise interest rates again, and they expect the central bank to wait until at least the end of March before cutting them, as the probability of a recession within a year falls to its lowest level since September 2022.
Despite the optimism from some economists and Wall Street experts, economist Oren Klachkin believes that elevated interest rates, restrictive Federal Reserve policy, and tight lending standards will lead to a mild recession in late 2023 due to decreased consumer spending and slow hiring, although he acknowledges that the definition of a recession may not be met due to some industries thriving while others struggle.
Federal Reserve Chair Jerome Powell is expected to signal in his upcoming speech that the Fed plans to maintain its benchmark interest rate at a peak level for a longer period than anticipated, suggesting that any rate cuts are unlikely until well into next year, as the central bank aims to further slow borrowing and spending to reduce inflation.
The spike in retail inflation has raised uncertainty for investors and savers, with expectations of interest rate cuts being pushed to the next fiscal year and the possibility of a rate hike. The Reserve Bank of India projects inflation to stay above 5% until the first quarter of 2024-25, and food price pressures are expected to persist. While inflation may impact stock market returns, gold and bank deposit rates are expected to remain steady.
Cleveland Federal Reserve Bank President Loretta Mester believes that beating inflation will require one more interest-rate hike and then a temporary pause, stating that rate cuts may not begin in late 2024 as previously thought.
Bond traders are anticipating that the Federal Reserve will continue with interest-rate hikes, and next week's consumer-price index report will provide further insight on how much more tightening may be required to control inflation.
The US economy is facing a looming recession, with weakness in certain sectors, but investors should not expect a significant number of interest-rate cuts next year, according to Liz Ann Sonders, the chief investment strategist at Charles Schwab. She points out that leading indicators have severely deteriorated, indicating trouble ahead, and predicts a full-blown recession as the most likely outcome. Despite this, the stock market has been defying rate increases and performing well.
The Wall Street Journal reports a notable shift in the stance of Federal Reserve officials regarding interest rates, with some officials now seeing risks as more balanced due to easing inflation and a less overheated labor market, which could impact the timing of future rate hikes. In other news, consumer credit growth slows in July, China and Japan reduce holdings of U.S. Treasury securities to record lows, and Russia's annual inflation rate reached 5.2% in August 2023.
The Federal Reserve is expected to maintain its benchmark interest rate and may not cut it until the second quarter of 2024 or later, according to economists in a Reuters poll.
The labor markets are expected to pause on rate changes as the economy slows down, with growth in employment and capital expenditure decreasing and downside risks increasing, such as higher interest payments for the government and a potential United Auto Workers strike. However, there is hope for a rebound in 2024 with a potential pause in rate cuts and moderating inflation.
Following the European Central Bank's record high interest rate hike to 4%, there is speculation about how long rates will remain at this level, with analysts predicting a 12-month pause before any cuts are made, while also considering the impact of rising oil prices on inflation expectations in Europe and the US. The Federal Reserve is expected to hold rates steady in September, but there are divided opinions on whether another hike will be delivered this year, with markets anticipating rate cuts in 2024. Similarly, the Bank of England is anticipated to make one final hike in September as it assesses inflation and economic indicators.
Mortgage rates have experienced fluctuations over the past week, with 15-year fixed rates decreasing and 30-year fixed rates increasing, while the average rate for 5/1 adjustable-rate mortgages slightly decreased; experts predict that the Federal Reserve will not raise rates during its September meeting, but if inflation data exceeds expectations, mortgage rates could continue to rise in 2023.
The Federal Reserve will continue raising interest rates until inflation decreases, even if it means more people losing their jobs, according to CNBC's Jim Cramer.
The U.S. Federal Reserve kept interest rates steady but left room for potential rate hikes, as they see progress in fighting inflation and aim to bring it down to the target level of 2 percent; however, officials projected a higher growth rate of 2.1 percent for this year and suggested that core inflation will hit 3.7 percent this year before falling in 2024 and reaching the target range by 2026.
The Federal Reserve has paused raising interest rates and projects that the US will not experience a recession until at least 2027, citing improvement in the economy and a "very smooth landing," though there are still potential risks such as surging oil prices, an auto worker strike, and the threat of a government shutdown.
Central banks around the world may have reached the peak of interest rate hikes in their effort to control inflation, as data suggests that major economies have turned a corner on price rises and core inflation is declining in the US, UK, and EU. However, central banks remain cautious and warn that rates may need to remain high for a longer duration, and that oil price rallies could lead to another spike in inflation. Overall, economists believe that the global monetary policy tightening cycle is nearing its end, with many central banks expected to cut interest rates in the coming year.
BlackRock's Rick Rieder predicts that the Federal Reserve will cut interest rates next year due to a slowing economy, following the Fed's recent pause on rate hikes.
The Federal Reserve's interest-rate forecast is more hawkish than anticipated, with policymakers expecting to hold their key rate a half-percent higher through 2024 and cutting the federal funds rate by just one quarter-point over the next 15 months due to the economy's recent unexpected strength, despite doubts from Wall Street and rising Treasury yields.
Financial markets are betting on more rate cuts next year than what Federal Reserve policymakers believe is likely, which may complicate the Fed's efforts to control inflation.
Inflation is expected to rebound in 2024 due to a mismatch between supply and demand created by the shift from services to goods during the pandemic, as well as a chronic shortage of workers, according to BlackRock strategists. This could lead to higher interest rates and a higher risk of recession.
Minneapolis Federal Reserve President Neel Kashkari believes there is a 50% chance that interest rates will need to significantly increase in order to combat inflation, citing a strong case for the U.S. economy heading towards a "high-pressure equilibrium."
Rising interest rates, rather than inflation, are now a major concern for the US economy, as the bond market indicates that rates may stay high for an extended period of time, potentially posing significant challenges for the sustainability of government debt.
Billionaire investor Bill Ackman predicts that the Federal Reserve is likely done raising interest rates as the economy slows down, but warns of continuing spillover effects and expects bond yields to rise further.
The Reserve Bank of Australia (RBA) may cut interest rates in the second half of 2024, according to major bank economists, but the interest rate futures market does not anticipate any rate cuts until March 2025; historical data suggests that rate cut cycles following periods of high inflation have led to varying impacts on housing prices and unemployment, and it remains to be seen how the current economic conditions will affect these indicators.
Global monetary policy is expected to transition from a period of low interest rates to rate cuts by the beginning of 2024, with only a few central banks anticipated to maintain steady rates, according to Bloomberg Economics. The forecast signals a turning point in the tightening cycle and suggests that the era of ultra-low rates will not return anytime soon. The report also highlights a slower pace of descent compared to the initial rate hikes that led to the higher borrowing costs.
Economists are adjusting their expectations for a rate cut in India to beyond the first quarter of fiscal year 2025, following a hawkish policy stance from the Reserve Bank of India (RBI) that emphasizes a 4% inflation target.
Higher-for-longer interest rates are expected to hinder U.S. economic growth by 0.5%, potentially leading unprofitable public companies to cut their workforce, according to strategists at Goldman Sachs, who also noted that the Federal Reserve's current benchmark rate is insufficient to cause a recession. Additionally, the firm warned that the high rates could increase the U.S. debt-to-GDP ratio to 123% over the next decade without a fiscal agreement in Washington.
Rising interest rates on government bonds could pose a threat to the U.S. economy, potentially slowing growth, increasing borrowing costs, and impacting the Biden administration's priorities and the 2024 presidential election.
The IMF predicts that the world economy will grow at a slower pace of 2.9% in 2024 due to ongoing risks from higher interest rates, the war in Ukraine, and the eruption of violence in the Middle East, highlighting the need for tight monetary policy to combat inflation.
The U.S. stock market is currently trading at a discount to fair value, and Morningstar expects rates to come down faster due to optimism on inflation; strong growth is projected in Q3, but the economy may slow down in Q4, and inflation is expected to fall in 2023 and reach the Fed's 2% target in 2024. The report also provides outlooks for various sectors, including technology, energy, and utilities, and highlights some top stock picks. The fixed-income outlook suggests that while interest rates may rise in the short term, rates are expected to come down over time, making it a good time for longer-term fixed-income investments. The corporate bond market has outperformed this year, and although bankruptcies and downgrades may increase, investors are still being adequately compensated for the risks.
Federal Reserve officials are expected to pause on raising interest rates at their next meeting due to recent increases in bond yields, but they are not ruling out future rate increases as economic data continues to show a strong economy and potential inflation risks. The Fed is cautious about signaling an end to further tightening and is focused on balancing the risk of overshooting inflation targets with the need to avoid a recession. The recent surge in bond yields may provide some restraint on the economy, but policymakers are closely monitoring financial conditions and inflation expectations.
Despite high interest rates and sluggish GDP growth, analysts predict that the UK will avoid a recession due to a likely end to rate increases, falling inflation, and a return to real pay growth.
Economists warn that Britain's economy will grow less than expected next year due to the impact of higher interest rates and a weaker labor market, with GDP growth expected to be 0.7% in 2024. However, EY upgraded its GDP growth forecast for 2023 to 0.6%, citing an end to interest rate increases, falling inflation, and a return to real wage growth as factors that should prevent a recession. Inflation is expected to fall faster than previously forecast, reaching 4.5% by the end of the year before hitting the Bank of England's 2% target in the second half of 2024.
The Federal Reserve is expected to reach its 2% inflation target rate by early 2025 and is unlikely to raise interest rates in the near future, according to Mike Fratantoni, Chief Economist of the Mortgage Bankers Association. Fratantoni also predicts that the 10-year treasury rate will drop below 4% by the end of the year, leading to a decrease in mortgage rates over the next two years. The U.S. government's fiscal policy and debt limit impasse could continue to impact mortgage rates.
The Federal Reserve is expected to lower interest rates by the end of 2024, but the decline will be mild and likely to occur in the second half of the year, with the possibility of one more rate increase in 2023, according to policymakers and markets. The forecast for rate cuts is not as significant as the rate increases seen in previous years, with a projected decline of 1% in the Fed funds rate by the end of 2024. The Fed's own projections indicate short-term rates around 5% at the end of 2024, suggesting a slower trajectory for rate declines compared to market expectations. The Fed has scheduled eight meetings in 2024 to set the Fed funds rate, with the potential for rate cuts starting in June or later. The decision to lower rates may not happen until the summer of 2024, as the Fed has emphasized that it plans to cut rates gradually rather than making immediate cuts. The outlook for rates is based on the expectation that inflation will take more time to reach the Fed's target of 2% and that unemployment will increase slightly. The main risk to the rate outlook is a more severe recession in 2024, but the Fed's current focus is on addressing inflation. Recent data for 2023 has been positive, indicating that the economy may have avoided a recession. Overall, while interest rates are expected to decline in 2024, the decrease will be modest and delayed.
Rise in long-term Treasury yields may put an end to historic interest rate hikes that were meant to lower inflation, as 10-year Treasury yields approach 5% and 30-year fixed rate mortgages inch towards 8%. This could result in economic pain for American consumers who will face higher car loans, credit card rates, and student debt. However, it could also help bring down prices and lower inflation towards the Federal Reserve's target goal.
U.S. inflation slowdown is a trend, not a temporary blip, according to Chicago Federal Reserve President Austan Goolsbee, who believes the downward trend will continue and hopes that it does, while also expressing concern over rising oil prices and possible economic disruptions in the Middle East; Mortgage Bankers Association Chief Economist Mike Fratantoni suggests the Fed is likely done with interest rate hikes and may reach its 2% inflation target by early 2025, with a low probability of rate hikes in November or December; Philadelphia Fed Reserve President Patrick Harker believes interest rates can remain untouched if economic conditions continue on their current path, as disinflation is taking shape and the Fed's interest rate policy is filtering into the economy; Mortgage rates have been affected by the federal government's increasing spending and smaller revenues, leading to a heavier impact on mortgage rates this fall.
Mortgage rates may see a slight decline in 2024, potentially offering some relief for homebuyers, due to possible rate cuts by the Federal Reserve, decreasing inflation, and a cooling job market.
High inflation is expected to persist in the global economy next year, posing a risk of interest rates remaining higher for longer than anticipated, according to a Reuters poll of economists. While some central banks were initially predicted to start cutting rates by mid-2024, the survey suggests that a growing number of economists are now pushing the more likely date into the second half of next year.
High inflation is expected to persist in the global economy next year, posing a higher risk than initially forecasted and indicating that interest rates will remain elevated for a longer period, according to a Reuters poll of economists. Most central banks are delaying interest rate cuts until the second half of 2024, with inflation still rising faster than desired. The poll also reveals downgraded growth forecasts and upgraded inflation predictions for a majority of the surveyed economies. The U.S. economy stands out with unexpected strong growth, while some economists suggest that current policy may not be restrictive enough.
The Federal Reserve may need to increase interest rates further to combat persistent inflation in the US economy, despite the recent surge in Treasury yields prompting investors to question further rate hikes, according to Richard Clarida of Pimco. Clarida also highlighted the challenge of deciding when to start cutting interest rates and predicted that the US dollar will return to a more normal level once rate differentials close.
