Monetary Easing Trends in November

By Karin Strohecker and Sumanta Sen
LONDON (Reuters) – Monetary easing by central banks across developed and emerging economies continued in November as markets prepared for potential shifts in global policy-making in the coming year.

Four of the six central banks overseeing the ten most heavily traded currencies lowered their lending benchmarks in November. New Zealand and Sweden each reduced their interest rates by 50 basis points, while the U.S. Federal Reserve and the Bank of England implemented cuts of 25 basis points.

Conversely, policymakers in Australia and Norway decided to maintain their interest rates. Additionally, no rate-setting meetings were held by central banks in Switzerland, Japan, Canada, or the European Central Bank.

The outcome of the U.S. election, with Donald Trump returning to the White House on January 20, is anticipated to escalate trade tensions, potentially increasing U.S. inflation and constraining growth.

According to James Rossiter, head of global macro strategy at TD Securities, these recent monetary moves come ahead of significant shocks expected for the global economy, with politics becoming increasingly unpredictable. "The name of the game in 2025 is now uncertainty, especially in the U.S. and Europe," Rossiter stated, emphasizing that central banks will need to swiftly adapt their strategies.

As of November, the year-to-date tally of rate cuts across G10 central banks reached 650 basis points, nearly matching the 2020 total of 655 basis points. This follows a period where no cuts occurred between 2021 and 2023.

In emerging markets, 12 of the 18 central banks in developing economies reviewed their rates in November. South Korea, Mexico, South Africa, and the Czech Republic each delivered 25 basis point cuts, while China, Indonesia, Turkey, Malaysia, Israel, Hungary, and Poland maintained their rates. Brazil, however, extended its rate hike cycle, increasing its key interest rates by 50 basis points.

S&P Global Ratings' emerging market chief economist, Elijah Oliveros-Rosen, noted that the changing outlook for fewer rate cuts from the Fed post-U.S. election would influence policymaking in developing economies. "We also expect greater caution among most major EM central banks, leading to toned-down expectations for their interest rate cuts in 2025," he stated. He predicts a stronger U.S. dollar against most emerging market currencies in 2025 compared to 2024.

The total cuts in emerging markets since the beginning of the year have reached 1,810 basis points, exceeding the 1,765 basis points of easing in 2022, following 945 basis points in 2023. So far in 2024, hikes in emerging markets stood at 1,350 basis points.