The central bank’s latest report has been released! What does it imply about policy direction in 2024?

Moreover, Leverage Games observes that the central bank will continue intensifying monetary policy support for private and micro-enterprises. Specific data points are omitted here. The focus remains on implementing already-announced policy documents and making systematic arrangements to bolster financial support for the private sector’s development, guiding financial institutions to embrace the principle of ‘equal treatment’... 6. The interest rate hiking cycles of major economies are nearing their end. 1) In July, the U.S. Federal Reserve raised rates by 25 basis points, lifting the federal funds rate target range to 5.25%–5.5%. It paused hikes in September and November; Fed Chair Jerome Powell stated that future policy decisions will be based on ongoing assessments of the economic outlook and risks. Meanwhile, the Fed continues its balance sheet reduction program as scheduled. 2) The European Central Bank (ECB) raised rates by 25 basis points at both its July and September meetings, then paused in October. Its main refinancing operations rate, marginal lending facility rate, and deposit facility rate now stand at 4.5%, 4.75%, and 4%, respectively. Starting in July, the ECB ceased reinvesting principal repayments from maturing securities under its Asset Purchase Programme (APP). 3) The Bank of England raised its base rate by 25 basis points to 5.25% in August, paused in November, and announced plans to sell £100 billion of UK government bonds over the next 12 months, reducing its holdings to £658 billion. 4) The Bank of Japan maintained its short-term policy rate at -0.1% and kept its 10-year JGB yield target near zero—but enhanced the flexibility of its Yield Curve Control (YCC) framework, adopting 1% as a reference upper bound for yield fluctuations. 5) Additionally, Canada’s central bank raised rates by 25 basis points in Q3; Australia, South Korea, and New Zealand held their benchmark rates steady. 6) Monetary policies among emerging economies are diverging. Leverage Games notes that in Q3, central banks in Argentina, Turkey, Russia, and Egypt hiked rates by 2,100, 1,500, 550, and 100 basis points, respectively; India, Mexico, Indonesia, Malaysia, and South Africa held rates unchanged; while Chile and Brazil cut rates by 175 and 100 basis points, respectively. 7. Notable issues and trends: 1) Economic growth has yet to rebound to pre-pandemic levels. Geopolitical tensions remain complex and volatile: the Russia-Ukraine conflict persists, and the Israel-Hamas war has intensified. The cumulative effects of advanced economies’ rate hikes continue to weigh on global growth momentum. The World Trade Organization forecasts global trade growth in 2023 at just 0.8%, far below 2.7% in 2022. The International Monetary Fund (IMF) projects global GDP growth in 2023 will slow to 3%, down from 3.5% in 2022—and well below the 3.8% average recorded between 2000 and 2019. 2) Inflationary pressures persist amid high interest rates. Although inflation has broadly eased across major advanced economies since 2023, it remains above target levels, suggesting central banks may sustain elevated rates for an extended period. Currently, labor markets in the U.S. and Europe remain tight, wage growth is robust, and core services inflation—excluding rents—remains resilient, sustaining risks of a ‘wage-price spiral.’ Meanwhile, energy prices could fluctuate again due to prolonged oil production cuts by major exporters and heightened tensions in the Middle East. 3) Global debt levels have reached historic highs. IMF data shows global debt totaled $235 trillion in 2022—equivalent to 238% of global GDP—up 9 percentage points from 2019.

The ‘Super Central Bank Week’ is here! Japan leads with a rate hike; the ‘easing cycle’ among advanced-economy central banks is drawing to a close—will the Fed be left ‘cutting alone’ next year?

Supporting this decision will be Monday’s release of the Bank of Japan’s ‘Tankan’ survey. Market expectations point to continued improvement in business confidence among large manufacturers over the three months ending December—bolstering the case for tighter monetary policy. Japanese authorities have previously signaled through multiple channels their intent to prepare investors for a rate hike. Additionally, Japan’s November CPI data—due next Friday—is expected to show core CPI remaining elevated at a 3.0% year-on-year pace, further paving the way for a rate increase. ECB to hold steady; UK may deliver its ‘final cut’ In contrast to Japan’s tightening stance, the Bank of England (BOE) is expected to ease policy—but this may mark the tail end of its easing cycle. According to a Bloomberg survey of economists, all respondents forecast a BOE rate cut on Thursday. The key market question centers on whether Governor Andrew Bailey—who dissented at the previous meeting—will now vote in favor of a cut. Regardless of the outcome, analysts widely view this as likely one of the last few easing moves in the BOE’s current cycle, signaling a shift in its policy focus. Meanwhile, the European Central Bank (ECB) is expected to hold rates steady. Bloomberg Economics’ proprietary ECBspeak sentiment index indicates hawkish officials currently dominate—virtually guaranteeing no change at the December meeting. Markets will closely watch President Christine Lagarde’s speech and the ECB’s updated quarterly projections for clues on when a potential pivot toward tightening might occur. Elsewhere in Europe, central banks in Sweden, Norway, and the Czech Republic are also expected to keep rates unchanged this week. Will the Fed cut ‘alone’? The Federal Reserve recently lowered rates by 25 basis points as anticipated, and markets broadly expect it to maintain accommodative policy into next year. Morgan Stanley and Citigroup forecast another cut in January, judging the easing cycle not yet complete. Goldman Sachs and Barclays note that the relatively hawkish language in the Fed’s policy statement aims to ‘balance’ this cut—avoiding overly dovish signals. Citigroup, Morgan Stanley, and JPMorgan all anticipate the first cut in January. Citigroup expects a second cut in March; Morgan Stanley sees the second cut in April; while JPMorgan believes policy will enter a ‘wait-and-see’ phase thereafter. Policy divergence: Advanced economies ‘braking,’ emerging markets ‘accelerating’ The global monetary policy landscape is growing increasingly complex and fragmented. As easing momentum wanes among advanced economies, other central banks continue moving along the accommodative path. According to Bloomberg, Thailand’s central bank (BOT) is expected to cut rates by 25 basis points on Wednesday, while economists remain divided on whether Indonesia’s central bank (BI) will follow suit. In Latin America, policy divergence is equally pronounced. Chile and Mexico’s central banks are expected to cut rates this week to address economic pressures. By contrast, Colombia’s central bank—following better-than-expected inflation data—may opt to hold its benchmark rate steady at 9.25%.

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