Central banks ease rate hike push in October

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LONDON, Nov 2 (Reuters) – The pace and scale of interest rate hikes decided by central banks around the world in October have slowed significantly from the all-time high in September.

Central banks overseeing four of the 10 most traded currencies saw rate hikes of 200 basis points between them last month. Policymakers at the European Central Bank, Reserve Bank of Australia, Reserve Bank of New Zealand and Bank of Canada raised lending rates.

Interest rates for the rest remained unchanged, although all – like the US Federal Reserve or the Bank of England – had no decisions to make in October.

By comparison, eight of the same 10 central banks raised rates by a combined 550 basis points in September, the fastest rate of tightening in at least two decades.

The latest measures took total rate hikes in 2022 from G10 central banks to 2,050 basis points.

“The pace of central bank tightening has likely peaked,” JPMorgan’s Marko Kolanovic said in a note to clients.

“More dovish rhetoric from the ECB, BoC, Fed and RBA recently has indicated that the pace of central bank tightening is likely to slow in the coming months, although it is early to assess whether this means a drop in the terminal rate.”

Emerging market interest rates

Markets have recently been encouraged by indications that rate hikes by major central banks – particularly the Fed – are slowing.

However, any optimism on this front could be premature, said Jean Boivin, director of the BlackRock Investment Institute.

“We see central banks on the path to excessive policy tightening,” Boivin said Monday in a weekly outlook note from the world’s largest asset manager.

“We believe the Fed, like other central banks in developed markets, will only halt when the severe damage from rate hikes becomes clearer. Rates have already reached levels that could trigger recessions, at our opinion.”

Policymakers and analysts have warned of a growing risk of recession, especially in Europe.

Data from emerging market central banks painted a similar picture. Five of 18 central banks raised rates by 325 basis points in October, less than half of September’s total and well below the monthly total of more than 800 basis points in June and July.

Indonesia, South Korea, Israel, Colombia and Chile have all raised interest rates as the hike cycle also comes to an end, although there are some differences in short-term trajectories. While policymakers in Chile have indicated that no further rate hikes are expected at this time, Israel’s central bank said it has seen rates rise to levels above current levels.

Meanwhile, Turkey, where President Tayyip Erdogan is pushing for lower interest rates, made a benchmark cut 150 basis points bigger than expected despite inflation above 80%.

“The magnitude of cost-of-living pressures is highly out of sync in the EM complex, with clear winners and losers,” said MUFG’s Ehsan Khoman.

In total, emerging market central banks have raised interest rates by a total of 6,765 basis points since the start of the year, more than double the 2,745 basis points for all of 2021. , according to the calculations.

Emerging market interest rates

Reporting by Karin Strohecker and Vincent Flasseur; Editing by Alexandra Hudson and Jonathan Oatis

Our standards: The Thomson Reuters Trust Principles.

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