Central banks hint at end of rate hike cycles

BoE's chief economist has stirred hopes of rate cuts from next summer

Sonal Badhan,

Economist,

Bank of Baroda

Mumbai, November 8, 2023: As a result of weakening global demand, China’s trade data showed that its exports fell by 6.4% (est.: -2.9%) in Oct’23, following 6.2% decline in Sep’23. Exports to Asia and EU fell sharply. In contrast, its imports rose by 3% (est.: -4.5%), rebounding from 6.3% dip in Sep’23 and registering first positive print in a year. Elsewhere, even Taiwan’s export growth fell in Oct’23 by 4.5% compared with 3.4% increase in the previous month, largely owing to slowdown in global sales smartphones. Drop in disposable income due to weak economic activity and higher prices is impacting demand conditions. Central banks are thus hinting at end of their rate hike cycles. BoE’s chief economist has stirred hopes of rate cuts from next summer. Fed Chair’s speech is also awaited for cues on US rate trajectory.

• Global indices ended mixed. US indices closed higher as investors anticipated the end of rate hike cycle and remained cautious about Fed commentary. As per CME Fedwatch, there is 90% of chance of Fed holding rates in Dec’23. Amongst indices, Hang Seng dropped the most. Sensex ended flat with sectoral gains in oil& gas stocks. It opened lower today in line with other Asian stocks.
• Global currencies ended lower against the dollar. DXY gained by 0.3%. Euro fell by 0.2% after Germany's industrial production dropped more than expected and dented investor sentiments. INR fell by 0.1% amidst a sharp drop in oil prices. It is trading stronger today while other Asian currencies are trading mixed.

  Barring Japan (flat) and China (higher), other sovereign yields closed lower. 10Y yield in UK fell the most, as BoE’s chief economist signalled that rate cuts could begin from next summer. Investors also expect Fed Chair to signal end of rate hike cycle in his speech due this week. India’s 10Y yield was down by 3bps as oil prices eased. It is trading further lower today at 7.26%.