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Central Bank Roundtable: 14 October

• Fed officials are divided on the size of the first rate cut

ECB Minutes: Cautious stance on further easing

• The Reserve Bank of New Zealand cut its benchmark interest rate by 50 basis points to 4.75%

• The Bank of Korea cut its benchmark interest rate by 25 basis points

• The Bank of India left its benchmark interest rate unchanged at 6.5%.

• The Central Bank of Peru left its benchmark interest rate unchanged at 5.25%.

【Global Central Bank Dynamics】

• The minutes of the Fed's September meeting showed that the vast majority of members supported a 50 basis point cut in interest rates; Some participants noted that at the July meeting, there was a reasonable case for a 25 basis point rate cut. Officials agreed that the larger rate cuts adopted at the meeting should not be taken as a signal of concern about the economic outlook or that the Fed is ready to cut rates quickly.

• A look at last week's speeches by Fed officials:

Fed Vice Chair Jefferson said the Fed's 50-point rate cut last month was aimed at keeping the labor market strong amid a continued slowdown in inflation. When considering further rate cuts, the upcoming data, the economic outlook and the balance of risks will be watched.

New York Fed President Williams said that despite the small setbacks, the overall downward trend United States inflation is still quite solid; After a 50bp cut in September, it would be appropriate for the Fed to cut rates again "over time".

Governor Coogler said she strongly supports the Fed's recent move to cut interest rates and will support further rate cuts if inflation continues to slow as she expects.

Atlanta Fed President Bostic said he was open to a 25 basis point rate cut or a step at next month's meeting, depending on how the economic outlook develops.

Richmond Fed President Barkin said United States debt continues to rise, creating the risk that borrowing costs will become higher. The Fed is trying to balance labor market and inflation risks. There is growing confidence that inflation is under control and that inflation is moving in the right direction.

Chicago Fed President Goolsbee said the latest inflation data was largely in line with expectations. The general trend for 12 to 18 months is clearly that inflation has fallen sharply and that the job market has cooled to near full employment.

Boston Fed President Collins said further rate cuts may be needed in the future, and future actions will be data-driven. The Fed's September projections showed that a 50 basis point rate cut was expected by the end of the year.

• ECB policymakers appeared to be satisfied with the decline in inflation at last month's meeting, but advocated a gradual easing of policy given that there is still pressure, the ECB minutes showed. The minutes showed that the ECB is more concerned about the growth outlook and more confident that inflation will return to its 2% target next year.

• A summary of the speeches made by ECB officials last week:

Governing Council member Villeroy said the ECB is "very likely" to cut interest rates, but not too much.

Governing Council Membere Spinalas believes that two more rate cuts are possible this year and expects further rate cuts in 2025.

Nagel, the governing council, said he was open to a rate cut in October.

Waslai said that interest rates could be cut to neutral by the end of 2025, and inflation risks have weakened, but there is still some uncertainty, and a rate cut in October is an option.

Governing Council member Centenno said that the easing cycle will be faster than in June, monetary policy must be predictable, and the ECB must be cautious and gradual in its decision-making.

• The Reserve Bank of New Zealand cut its benchmark interest rate by 50 basis points to 4.75%, in line with market expectations and the second consecutive rate cut. The Reserve Bank of New Zealand noted that inflation is in the 1% to 3% target range and tends to move closer to the midpoint of 2%.

• The Bank of Korea announced a 25 basis point cut in its benchmark interest rate to 3.25%, easing monetary policy for the first time in 38 months. The Bank of Korea noted that inflation has shown a clear trend of stabilization, while domestic demand has recovered slowly.

• RBA minutes showed that the current cash rate strikes the best balance between inflation and labour market risks; Given the uncertain economic outlook, a scenario of interest rate cuts, keeping interest rates unchanged and raising interest rates is within the conspirable range.

•Switzerland deputy governor of the central bank said price stability is the top priority of the Switzerland central bank; The main instrument of the Switzerland central bank is the policy rate, and foreign exchange intervention is a secondary instrument; Much of the current inflation in Switzerland is driven by domestic factors and services-related factors.

• The Central Bank of Peru left its benchmark interest rate unchanged at 5.25%. The central bank of Peru said future rate cuts will depend on inflation data and its determinants, with core inflation expected to remain within the expected target range compared to the same period last year.

• The Reserve Bank of India left its benchmark interest rate unchanged at 6.5%, in line with market expectations. At the same time, the Bank of India adjusted its policy stance to "neutral", opening the door for a possible next rate cut.

Russia's external debt stood at $293.4 billion as of Oct. 1, down 7.7% from the beginning of the year and below $300 billion for the first time since 2006, according to data released by Russia's central bank.

【Market Watch】

• Sweden's Nordio Bank noted that Fed raters are divided on whether to cut rates by 50 basis points in the September interest rate decision, but there is a consensus on the pace of subsequent policies. The Fed minutes did not show any intention of the interest rate committee members to continue to cut interest rates aggressively; The Fed does not want the 50 basis point rate cut in September to be seen as a signal of a rapid rate cut in the future. The Fed's interest rate committee generally agreed that the Fed would gradually shift to a more neutral monetary policy stance over time, although the minutes did not clearly state a specific view of the neutral rate. The current uncertainty about the degree of economic restrictions in the United States is seen as one of the reasons to support a gradual rate cut. The situation could adjust if economic data deteriorates further, but for now, a 25bp cut in each of the next two meetings is the most likely.

Citi expects the Reserve Bank of New Zealand to cut interest rates by 75 basis points at its November meeting, which is more than the 50 basis points previously expected. With unemployment rising, economists expect the MPC to ease policy further at its November policy meeting. Citibank maintained its forecast for a terminal rate of 2.75% in 2025 and expects this target to be achieved one quarter earlier than originally planned, in the third quarter. With central banks in other major economies also taking accommodative monetary policy measures, the sharp rate cut is "unprecedented".

Morgan Stanley economists said the Korea bank's rate cut this month was described as a "long-awaited rate cut," noting that it has been a full 22 months since the last rate adjustment since January 2023. The macro environment provides strong support for interest rate cuts, while the inflation backdrop appears to be "favorable". Since July this year, inflationary pressures in Korea have gradually eased, and the upside risks to inflation seem to have dissipated; In addition, the decline in housing demand in Korea has also created favorable conditions for Korea central bank officials to shift to a dovish stance. Korea's red-hot housing demand was one of the main factors preventing the Bank of Korea from cutting interest rates; After the Bank of Korea cut rates by 25 basis points in October, the Bank of Korea will cut interest rates three times in a row on a quarterly basis, eventually reducing the benchmark interest rate to 2.5%.

【This week's highlights】

•Monday

14:30 Monetary Policy Commissioner of the Bank of United Kingdom Dingla speaks

15:00 ECB Governing Council member Villeroy speaks

21:00 2026 FOMC Voting Committee Member and Minneapolis Fed President Kashkari participates in a panel discussion

Time to be determined The Monetary Authority of Singapore announced its monetary policy decision

•Tuesday

03:00 Fed Governor Waller speaks on the economic outlook

16:00 ECB releases loan survey report

23:30 2024 FOMC member and San Francisco Fed President Daly speaks

•Wednesday

01:00 Fed Governor Coogler speaks

06:00 RBA Chief Economist Jeremy Hunt speaks

06:45 Karen Silk, Assistant Governor of the Reserve Bank of New Zealand, speaks

09:30 Seiji Adachi, a member of the Bank of Japan Councillor, delivers a speech

15:00 The Bank of Thailand announces its interest rate decision

15:00 The Bangko Sentral ng Pilipinas (BSP) announces its interest rate decision

15:20 Bank Indonesia announces interest rate decision

•Thursday

19:00 The Central Bank of Turkey announces its interest rate decision

20:15 ECB announces interest rate decision

20:45 ECB President Christine Lagarde holds a monetary policy press conference

•Friday

The time to be determined is the opening of the 2024 Financial Street Forum Annual Conference

16:00 The European Central Bank (ECB) publishes its survey of professional forecasters

22:00 2026 FOMC member and Minneapolis Fed President Kashkari speaks

Editor: Wang Xiaowei

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