As inflation continues its downward trend in developed markets, central banks are poised to reduce interest rates, even though inflation is not yet below the 2% target in many economies.
Intriguingly, markets expect a rather synchronised move, anticipating rate cuts of about 100 basis points (bps) in 2024 in the US, the eurozone and the UK. A notable outlier is the Swiss National Bank, where
markets expect 50 bps of cuts in 2024, albeit from a relatively low rate. This expectation of a synchronised
move appears somewhat inconsistent given the varied economic dynamics across regions. The eurozone, UK, and Switzerland are witnessing very weak GDP growth, while inflation rates have declined markedly in recent
months. Swiss inflation, in particular, has already been in the target range since June 2023. Contrastingly, the US economy has maintained robust growth in the second half of 2023 and persistent inflation above 3% year-on-year for the past seven months.
