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US Fed, BoE Hold Fire On Rates; Switzerland Cuts – Wealth Managers' Reactions

Editorial Staff

22 March 2024

It has been a busy week for central banks. The Bank of Japan raised rates for the first time in 17 years; the US Federal Reserve is still pausing on monetary tightening, and the Bank of England left rates unchanged yesterday. And although this didn't prompt much market reaction or commentary to this publication, the Swiss National Bank cut interest rates – unexpectedly – by 25 basis points, to 1.5 per cent. 

The Fed extended pausing its monetary tightening campaign for a fifth meeting in a row and it kept to its projection for three 25 basis point cuts in 2024. However, the Fed revised its projections for cuts in 2025, with 75 basis points of cuts pencilled in, instead of 100 basis points in its previous quarterly projections.

As for the BoE, it voted eight to one to keep rates unchanged at 5.25 per cent, as expected. 

Here is a range of responses to the Fed’s actions (reactions to the BoE and SNB are further below):

Neeraj Seth, chief investment officer, APAC fixed income, and Navin Saigal, head of Asia macro for fundamental fixed income,
As it seems very likely that inflation will continue to move downwards over the next few months, we would still expect to see interest rate cuts in the middle of the year. UK domestic stocks are currently valued very modestly in relation to their history, but as recent trading news from companies such as Wickes, DFS, Marshalls and Travis Perkins has shown, demand is currently weak. It is likely though when interest rates are cut that stocks which are mostly exposed to the UK economy could well start to attract more interest again.

Swiss National Bank
Capital Economics

The SNB under chairman Thomas Jordan has never shied away from making big calls, so it was fitting that it surprised markets with a 25 bp rate cut today, to 1.5 per cent, only three weeks after Mr Jordan announced he would leave his post in September. We expect two more rate cuts this year, leaving the policy rate at 1.0 per cent. In contrast, Norges Bank left its policy rate on hold today and appeared in no rush to start cutting rates, but we still think it will ease policy sooner than it is signalling.