Monetary policy paths diverge among major economies: Fitch

April 25, 2024 (MLN): The direction of monetary policy moves is diverging among the major economies, after a period of unusually synchronized interest rate rises in 2022 and 2023, as highlighted in Fitch Ratings’ latest ‘20/20 Vision’ chart pack.

The Swiss National Bank (SNB) became the first major developed-market central bank to embark on an interest rate-cutting cycle. Meanwhile, two emerging-market central banks, Banxico and Central Bank of Brazil both cut rates in 1Q24, as inflationary pressures continued to ease.

SNB cut its policy rate in March by 25bp, to 1.50%, its first rate cut since December 2014, when the policy rate was moved into negative territory.

At the same time, the Central Bank of Mexico cut its target rate by 25bp, to 11%, for the first time since February 2021.

As such, it joined the Central Bank of Brazil, which started its policy-easing cycle in August 2023 and lowered its Selic target rate twice, in 1Q24 in February and March by a cumulative 100bp, to 10.75%.

By contrast, two Asian central banks in Japan and Indonesia recently raised their policy rates.

The Bank of Japan took its policy rate out of negative territory in March and now targets a range of 0.0%-0.1%, as inflation is becoming more sustainable. Bank Indonesia lifted its benchmark rate by 25bp in April, to 6.25%.

The Central Bank of the Republic of Turkiye increased its policy rate again in March by 500bp, to 50% amid a deteriorating outlook for inflation and depreciation of the lira. CPI inflation rose in March to 68.5% yoy and the lira reached a record high level exceeding TRY32 per dollar in April 2024.

Fitch's bi-monthly ‘20/20 Vision’ chart pack covers the 20 major economies (the Fitch20) that are the focus of the Fitch Economics team's global macro analysis, and plots five years of high-frequency economic data for 20 variables, with consistent coverage across each country.

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