After clashing in recent years, Wall Street traders and the Federal Reserve are – for once – broadly in sync: The great monetary pivot is near as central bankers engineer a once-unthinkable soft landing in the world’s largest economy.

That’s the big-picture takeaway after the Fed gave its clearest signal yet that its historic policy tightening campaign is over by projecting more aggressive interest-rate cuts in 2024 – in the process igniting one of the biggest post-meeting rallies in recent memory.

Virtually no corner of financial markets was left out of Wednesday’s cross-asset advance: Global shares spiked higher. Front-end Treasuries posted their best day since March. World currencies surged against the dollar and corporate bonds rallied. (BBG - Continue Reading) 

The Bank of England will be the last of the major central banks to announce monetary policy this week but similar to its peers, will likely disparage talk of cuts. The BoE’s Monetary Policy Committee is widely anticipated to keep its main lending rate at 5.25% on Thursday.

Barclays’ Silvia Ardagna along with the majority of polled analysts looked for no change to interest rates. “We think the vote will remain split, with governor Andrew Bailey and the deputy governors Sarah Breeden, Ben Broadbent, and Dave Ramsden, and chief economist Huw Pill forming a majority block for holding, while the external MPC members Megan Greene, Jonathan Haskel, and Catherine Mann will continue to vote for a 25bp hike.”

Economic data heading into the meeting has been favourable with inflation trending lower and the labour market continuing to loosen. However, the deterioration in growth may make it harder for policymakers to argue against the need for cuts next year. (LiveSquawk - Continue Reading) 

The European Central Bank is widely expected to hold rates at current levels Thursday for its last decision of 2023, and analyst are leaning in to see if policymakers are ready to hint at a more dovish stance.

An economists’ poll said ECB officials will vote to leave the overnight deposit rate at 4.0% and the main refinancing rate at 4.5%. A hold on Thursday would be the second straight after October’s, which followed 10 consecutive rate increases.

The bank spelled out its reasoning for staying the course six weeks ago: “The governing council is determined to ensure that inflation returns to its 2% medium-term target in a timely manner. Based on its current assessment, the governing council considers that the key ECB interest rates are at levels that, maintained for a sufficiently long duration, will make a substantial contribution to this goal.” (LiveSquawk - Continue Reading) 

Switzerland’s central bank is widely expected to leave its benchmark interest rates unchanged Thursday amid the slowing pace of consumer price growth in the Alpine nation. An economists’ poll predicted the bank will hold its key policy rate at 1.75%.

Flagging consumer price growth in Switzerland sparked an unexpected rate hold in September and has likely ended the tightening cycle at the Swiss National Bank. “The lower-than-expected Swiss inflation in November both shut the door on the idea of further rate hikes and opened the door to rate cuts,” wrote analyst Adrian Prettejohn, at Capital Economics.

“The average inflation rate of 1.5% over October and November was well below the SNB’s forecast for Q4 of 2.0% and will force policymakers to reconsider whether they really think inflation will rise above 2% next year, as they forecast in September,” Prettejohn noted. “Moreover, the reduction in interest rate expectations in the Eurozone further eases pressure on the SNB to keep their own policy relatively tight.” (LiveSquawk - Continue Reading)