Global Central Banks' Interest Rate Policies Under the Microscope

The world's largest economies' central banks are trying to shape their interest rate policies based on economic conditions. In recent developments, San Francisco Fed President Mary Daly emphasized that policies need to be carefully calibrated to control inflation without slowing down the labor market. While the European Central Bank discusses plans to bring interest rates closer to neutral levels, possible changes in the interest policies of the Bank of Japan and the Reserve Bank of India are also on the agenda.

Daly believes there is no urgency for rate cuts. San Francisco Fed President Mary Daly stated that the central bank must carefully set policies to reduce inflation without slowing down the labor market. Daly said the decision on whether the Fed will lower or hold interest rates is not yet clear. "I will wait until the December meeting and do all the analyses," she noted, indicating that she will assess real-time data collected from the field before the decision. She also added that she would discuss with her colleagues what the right policy calibration should be to support the decline in inflation and the health of the U.S. economy during the policy meeting.

Regarding the ECB's interest rate policy and neutral rate assessment, European Central Bank (ECB) Governing Council member Joachim Nagel said that borrowing costs could be gradually reduced to levels that do not constrain economic activity. Nagel indicated that interest rates need to approach the neutral zone alongside a slowdown in consumer price growth. However, he does not believe the ECB should act hastily. While a quarter-point rate cut is expected at the ECB's final meeting of the year, some investors think a bigger move may be possible.

Expectations for the Bank of Japan's (BOJ) interest policy remain uncertain ahead of its upcoming meeting. Reports from Japanese media suggest that the BOJ may approach interest rate hikes with caution. Board member Toyoaki Nakamura stated that small firms are not strong enough to withstand higher borrowing costs. Nakamura expressed his uncertainty about the sustainability of wage increases and stated that the BOJ should be cautious in raising interest rates.

Japanese Prime Minister Shigeru Ishiba announced that there are no plans to revise the joint statement focusing on the economy from the Japanese government and the BOJ. Ishiba emphasized that the appropriate exchange rate level for the Japanese economy should be examined carefully. The Prime Minister noted that economic policies will continue to focus on combating deflation.

Unexpected rate cut signals from the Reserve Bank of India suggest that it may surprise markets with a rate cut during its meeting on Friday. Analysts from Nomura forecast that the repo rate will be lowered by 25 basis points to 6.25%. This expectation is based on reasons such as weakening growth and a positive inflation outlook. Analysts predict that the Reserve Bank of India's committee will unanimously decide in favor of the cut and anticipate that this step will not pose any issues from a policy perspective.