Futures markets agree: the hiking cycle has ended (except in Japan)
Is the global interest-rate “pause” here? Communications from central banks are trending that way: {{nofollow}}Federal Reserve Governor Christopher Waller said policy is “well-positioned,” while {{nofollow}}Bundesbank President Joachim Nagel said the inflation outlook is “encouraging.”
Futures markets, meanwhile, are almost unanimous in suggesting we have seen our last rate hike.
This chart tracks various futures markets (SONIA, ESTR and Fed funds, for instance) to show the rate path priced in by different central banks. Not only is the current level seen as the peak rate in most cases, the long-awaited “pivot” to cuts is priced in for 2024 – something Nagel and others have signaled is too early to contemplate. (Interestingly, the Reserve Bank of Australia is seen as staying on hold for slightly longer than its peers.)
As ever, the big outlier is Japan. As we’ve written before, it’s the last central bank with negative rates, and “lift-off” is expected next year.