Market expectations for a “significant fall in short-term interest rates are intensifying” despite central banks being cautious about their monetary policy outlook, it was announced on Monday.
This conclusion leads published on Monday quarterly report of the Bank for International Settlements (BIS), which analyzes the situation in the financial markets over the past three months.
The head of the BIS’s monetary and economic department, Claudio Borio, said in a quarterly report that “the longer it takes for markets to recognize that tightening is a central bank response,” the more likely a sharp price correction is. .
Therefore, Borio considers it important to close this gap between market expectations and the intentions of the central bank.
According to the BIS, several of the world’s major central banks have slowed their interest rate hikes but are cautious about the next steps as inflation is still very high and the labor market remains strong.
Interest rate futures reflect the market’s expectation that interest rate hikes will end this year, followed by a sharp decline in 2024.
But, adds Borio, “central banks have given no indication that monetary easing is around the corner as inflation remains high and labor markets correct.”