As a fundamental component of monetary policy and the economy, interest rates are influencing everything from mortgage rates to the returns on you savings. It plays a crucial role within the overall health of the financial system.
In 2023, central banks around the world have found themselves in a recurring cycle of interest rate adjustments. Whether it’s addressing inflationary pressures or responding to economic slowdowns, central banks have been repeatedly adjusting interest rates as a primary strategical decision.
U.S Interest rates in 2024:
PCE Core Inflation Index.
In the last 6 months, the PCE Core Inflation index has been decreasing. This fall is expected to continue, Preston Caldwell, a U.S Senior Economist, expects it to reach 2.4% in March 2024.
U.S Interest rates: 2024 Forecast
Despite the fact that markets are expecting the Fed to cut in March, there are no official indications yet. The Fed has been carefully managing Interest rate since March 2022 and kept under control high interest rates, but Jerome Powell explained that keeping high interest rates for too long can have serious consequence on the financial system and the economy. This explains why markets are expecting the fed to cut interest rate in March 2024.
6 Interest Rate cuts for the whole year.
Expectations are that the year 2024 will witness six interest rates. Federal-funds rate are expected to fall to 3.75% – 4.00% range, knowing that currently, the range is at 5.25% to 5.50% range. So, that’s a 150-basis-point reduction that we might witness by the end of 2024.
Switzerland Interest rates in 2024:
Switzerland, renowned for its stable financial sector, has been impacted as well by global financial situation. Switzerland has historically maintained low and even negative interest rates to combat the appreciation of the Swiss Franc, which tends to strengthen in times of economic uncertainty.
Due to the current economic factors, the Swiss National Bank decided to maintain interest rate at 1.75%. The SNB is not expected to intervene until mid 2024, after the risk of inflation is stable. The market is expecting key interest rate cut in 2024, which will lead to lower interest rates in Switzerland. It’s clear that interest rates trends will depend more than ever on the the SNB’s decisions.
Central Banks will continue their combat against both interest rates and inflation. Their influence affects mortgage rates, savings returns and the stability of financial systems globally. As we peer into the horizon of 2024, Central Banks tend to have more control over the situation and will continue their adjustments according to the economic situation.
(Figures source: Preston Caldwell Interview at Morningstar)