Recent analysis from Deutsche Bank (ETR:DBKGn) indicates a notable change in the approach of global central banks, with several institutions, including those of Brazil and Peru, opting to lower interest rates this month. This trend marks a pivot from the consistent rate hikes that have characterized monetary policy since January 2021.
The shift, identified by Deutsche Bank's Jim Reid, comes as the US Federal Reserve and the European Central Bank maintain a steady-rate stance despite predictions by UBS of a potential US recession by mid-next year. The Fed's series of 11 rate increases since March 2022 contrasts with the current inflation rate of 3.2% in October, which remains above their 2% target.
While major financial entities are yet to adjust their policies, the broader movement towards rate reductions suggests a cautious response to economic headwinds. Reid's analysis implies that market expectations for minor rate adjustments might evolve if economic conditions worsen, potentially leading to deeper cuts than currently anticipated.
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