Central Banks set to cut rates through 2025

This week we published our latest Bank of Ireland, Global Markets Watch. A key theme is that confidence has grown amongst financial market participants in recent months that CPI inflation rates are durably returning to central banks’ 2% targets. In part, this reflects tentative signs that the US economy is slowing, accompanied by the temporary correction in US equity markets. Moreover, Fed Chair Jerome Powell said in his August 23rd Jackson Hole speech that ‘the time has come to adjust policy’. The latest PMI surveys also suggest that after decent GDP growth of 0.3% and 0.2% in Q1 and Q2 2024 respectively, the pace of expansion may have slowed in the euro area. Hence, both the ECB and Federal Reserve are expected to cut interest rates at their September 12th and 18th policy meetings. Overnight index swap (OIS) curves now imply the ECB deposit rate and Fed Funds rate will fall to 2% and 3% respectively by end-2025.

Read the document in full below:

Bank of Ireland Economics Weekly 6th September 2024