Quarterly Edition: Slowdown Ongoing but Rate Cuts on the Horizon Will Help

We approach the end of a very turbulent 2023 on a cautiously optimistic note as (with a few exceptions, such as the BoJ) developed market central banks have come to the end of the tightening cycle and are now signaling that some relief on rates is not too far off. We had long argued that monetary policy nimbleness and a willingness to calibrate rates lower once progress on inflation permits was critical to maintaining a path to a soft landing. As recently as three months ago, that willingness was still in question, but no more. At their December meetings, the Fed and the ECB both signaled in no uncertain terms that, barring truly unexpected events, the next more in rates would be lower. While domestic conditions will dictate the pace at which other DM central banks can join the bandwagon, the direction of travel will be the same for all. In 2023 we described the global disinflation trend as a “different speeds, same direction” phenomenon. The 2024 global monetary easing cycle can be thought of in the same way.