PARIS - The inflection point in the global monetary policy cycle is nearing, as Switzerland became on March 21 the first major Western central bank to begin cutting interest rates after a period of hikes to tame inflation.

It seems all but certain that the tightening cycle that began two years ago is close to an end, with the only question being when other major central banks will follow in reducing rates, even if many analysts foresee a wave of cuts in June.

European Central Bank (ECB)

French central bank chief Francois Villeroy de Galhau said at the beginning of March that he considers it “very likely” that the ECB will make its first cut in the “springtime”, with the euro zone’s central bank to hold two spring meetings in April and June.

The April 11 meeting appears to be premature, with the June 6 gathering of policymakers seeming more likely after ECB chief Christine Lagarde said recently that the institution would know much more about the economic situation in the euro zone by the later date.

She warned earlier this week about the risk of acting “too late” on interest rate cuts.

The ECB’s deposit rate, which is the key policy rate, has been held at a record 4 per cent since October.

U.S. Federal Reserve

The Fed’s interest rates are at their highest in 20 years.

At a meeting on March 20 it kept them unchanged within a range of 5.25 per cent to 5.5 per cent, but they too could start coming down in June.

The CME FedWatch Tool, which measures investors’ expectations about Fed interest rate moves, indicates a first reduction in June, which would put an end to the cycle of rising rates that began in March 2022.

In total, the the US central bank’s monetary policy committee anticipates three cuts of a quarter percentage point each in 2024.

For 2025, the committee is now expecting another three cuts, down from the four it was previously forecasting.

Bank of England (BOE)

Like its American and European counterparts, the BOE could make its first downward rate movement in June, after a series of 14 consecutive hikes ending in September that took its key rate to 5.25 per cent, its highest since 2008.

A majority of watchers expect the first cut at the central bank’s June 20 meeting, according to a survey by Bloomberg.

“We’re not yet at the point where we can cut interest rates, but things are moving in the right direction,” BOE governor Andrew Bailey said on March 21.

“In recent weeks we’ve seen further encouraging signs that inflation is coming down.”

Bank of Japan (BOJ)

Contrary to other central banks, the BOJ on March 19 raised its rates for the first time since 2007, bringing the country out of an era of negative interest rates.

After years of morose economic activity kept inflation in check, the spike in energy prices after Russia’s invasion of Ukraine in 2022 revived inflation, taking it above the bank’s 2 per cent target.

But the BOJ indicated that it does not plan to make any more hikes for the time being given demand and growth remain weak.

Emerging nations?

As one of the first to cut last August after being one of the first to tighten at the start of the inflationary wave, Brazil on March 20 cut its key rate for the sixth consecutive time, bringing it down to 10.75 per cent.

Among other members of the Brics group of emerging nations, India is not expected to cut as its inflation rate remains well above the 4 per cent objective fixed by the central bank.

China cut one of its benchmark rates in June 2023.

In South Africa, the central bank aims to keep inflation in a range of 3 per cent to 6 per cent. The bank meets next week, but it is not likely to reduce its rates in the face of inflation that has held above 5 per cent and has recently accelerated. AFP