Are major central banks truly done with rate hikes?

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Major Central Banks Appear to Be Concluding Rate Hike Cycles Amidst Easing Inflationary Pressures

Global borrowing costs remain near multi-month lows, fueled by market expectations that major central banks have concluded their interest rate hiking cycles. This sentiment is supported by recent inflation data, including a further dip in China's inflation rate. While the US Federal Reserve is anticipated to maintain its current interest rate, there is less consensus regarding the timing of potential rate cuts, as inflation remains above the 2 per cent target.
Federal Reserve Signaling a Pause in Rate Hikes

The US Federal Reserve maintained its benchmark overnight interest rate within the 5.25 per cent to 5.50 per cent range at its last meeting. This decision, coupled with market confidence, has contributed to a rebound in the dollar following a sharp sell-off. However, the prospect of rate cuts remains uncertain, with inflation still exceeding the central bank's 2 per cent objective. The Federal Reserve is scheduled to convene again in mid-December, and upcoming weekly jobless claims data, predicted to reach 219,000, will be closely monitored for insights into the US labor market's performance.
Easing Inflationary Pressures Globally

Overnight inflation figures from China revealed a 0.1 per cent decrease compared to September and a 0.2 per cent year-on-year decline. This trend suggests persistent weak demand in the world's second-largest economy. In Europe, Germany's benchmark 10-year borrowing cost has moved up slightly from a two-month low of 2.6 per cent, indicating a broader market sentiment shift. The equivalent US Treasury note is trading just below 4.5 per cent, reflecting similar borrowing cost dynamics.
Market Sentiment Shifts Towards Bonds

Market strategists, such as Luca Paolini, Chief Strategist at Pictet Asset Management, express a bullish outlook on bonds, viewing inflation as a "yesterday's story." This perspective suggests a belief that the primary concern of rising inflation has receded, and the focus is shifting towards potential economic deceleration in the coming months. This sentiment aligns with the observation of global borrowing costs hovering near their lowest points in months.
Divergent Performance in Asian Markets

In Asia, Japan's Nikkei index experienced a notable increase of 1.5 per cent, buoyed by strong earnings reports from companies like Nintendo and Casio, alongside gains in the oil sector. Conversely, China's property market continues to face significant challenges, with the main Hong Kong-listed real estate index falling by 4 per cent. This downturn is partly attributed to embattled property developer Country Garden experiencing a substantial decline in its stock value amid setbacks in its restructuring efforts.

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Are major central banks truly done with rate hikes?

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